The Difference Between Wholesale and Retail Insurance Agencies

Retail Insurance Agencies

Most people who purchase insurance for their business, home or car deal with a retail insurance broker. According to the International Risk Management Institute, retail insurance agencies act "as an intermediary between an insured and the marketplace," purchasing insurance products from wholesalers and insurance companies and selling them to individuals or businesses. Some retail insurance agencies only write policies from one insurance company, and others will many will offer policies from different insurers.

Wholesale Insurance Agencies

Wholesale insurance brokers usually work directly with insurance companies and have little contact with the insured individual, family or business. According to the American Association of Managing General Agents, wholesale brokers usually specialize in one of two businesses, providing insurance either as a managing general agent or a surplus lines broker. Wholesale insurance agencies are sometimes able to offer more specialized insurance than retail brokers, due to their more extensive relationship with insurance companies.

Surplus Lines and Managing General Agents

Wholesale brokers that offer highly specialized types of insurance on the behalf of insurance companies are called excess and surplus lines brokers. The surplus lines market in the United States is relatively small compared to other insurance markets, according to Mercator Risk Services. Managing general agents, by contrast, offer more common products as the direct representative of insurance companies. Both surplus lines brokers and managing general agents must follow the policies and instructions of the insurance companies whose policies they offer.

Key Advantages

Both retail and wholesale insurance agencies offer specific advantages to different consumers. A major advantage of retail insurance agencies for consumers is that they are accessible; most purchasers of insurance policies can work with a retail agent, while wholesalers only do business with retailers or consumers of specialty insurance. On the other hand, wholesalers are usually able to offer more specialized policies than retail agents because they deal more directly with the insurance companies writing the policy. For consumers, wholesale insurers may be able to find a policy for less common needs that are not addressed by a retail agent.