What is 'Wholesale Insurance'

Wholesale insurance is coverage for employer groups that are too small to qualify for true group coverage. It is also known as franchise insurance. A wholesale insurance policy covers an entire group, though individual policies are written for each person that is to be insured.

BREAKING DOWN 'Wholesale Insurance'

Wholesale insurance is sold to members of a group with rates based on individual rates, typically with some type of discount based on expense savings. Wholesale health insurance, for example, is essentially an individual health plan that is provided to groups of people in companies that have fewer than 10 employees. In this case, each employee can purchase a policy, or in some instances, the employer would pay the premiums as part of an employee benefits package. Wholesale insurance brokers often possess specialized expertise in a particular line of coverage or in a line of coverage that is unusual and/or have greater access to or influence with certain insurance markets, which is especially valuable when dealing with a difficult-to-place risk.

Insurance wholesalers rarely have direct contact with the insured except in instances such as employee benefit and health plans. Because non-admitted carriers don't operate under state insurance laws, they have more pricing flexibility to ensure against unusual circumstances such as catastrophic events. That non-admitted carriers operate outside of state insurance laws is not red flag signaling financial instability. State licensing, filing and reporting requirements are simply different for non-admitted carriers. Further, larger non-admitted carriers are usually well-capitalized subsidiaries of major financial services companies. Due diligence however, demands that you check A.M. Best to determine the financial stability of any insurance company you're considering as your carrier.

Wholesale insurance agents place business brought to them by retail agents. Unlike a retail broker, wholesale brokers have a direct working relationship with the insurer, whereas the retail agent who produced the business does not. The same broker can function as a retailer or wholesaler, depending on the specific situation. 

There are two types of wholesale brokers: managing general agents and surplus lines brokers. The latter work with the retail agent and the insurer to obtain coverage for the insured; but unlike a managing general agent, a surplus lines broker does not have binding authority from the insurer.

Wholesale Insurance Products

Examples of wholesale insurance products for small business are high-risk products for chemical and flammable incidents; safety-critical products for transportation; structural integrity products for construction; pharmaceutical and medical products against product failure; environmental liability products; and privacy protection products against identity theft.

RELATED TERMS
  1. Insurance Coverage Area

    Insurance coverage area refers to the geographic region in which ...
  2. Agency Plant

    Agency Plant is the amount of presence that an insurance company ...
  3. Unauthorized Insurer

    An unauthorized insurer is a company that poses as an authorized ...
  4. Insurance Premium

    An insurance premium is the amount of money that an individual ...
  5. Commercial Lines Insurance

    Commercial lines insurance helps keep the economy running smoothly ...
  6. Health Insurance

    Health insurance is a type of insurance coverage that pays for ...
Related Articles
  1. Insurance

    12 Insurance Questions for High Net Worth Families

    High net worth families should ask themselves these 12 questions regarding comprehensive insurance.
  2. Insurance

    Becoming a Life Insurance Agent

    Few careers match the opportunity for as quick and large a paycheck as being a life insurance agent, but it takes the right personality.
  3. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  4. Insurance

    How Much Life Insurance Should You Carry?

    Before purchasing life insurance it is important to decide if you really need it, what type of policy is best, and how much coverage you should get.
  5. Insurance

    When Should You Get Supplemental Life Insurance?

    For individuals with larger families and responsibilities, supplemental life insurance may bridge the shortfall in coverage from term or whole-life policies.
  6. Insurance

    How to Find the Right Car Insurance

    Finding the right car insurance can be difficult. However with these strategies, you can get the most for your money, protect your assets and your health.
  7. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  8. Insurance

    5 Money-Saving Insurance Tips For Couples

    It may not be the best part of getting married, but saving money on insurance is a great financial benefit.
RELATED FAQS
  1. Can an Insurance Company Deny Coverage?

    Insurance isn't always as straightforward as other products, and insurers can deny coverage in many different instances. ... Read Answer >>
  2. How do I choose which insurance company to use?

    Picking an insurance company to use is not an easy task, but considering these factors will help you make this important ... Read Answer >>
Trading Center