Wholesale Insurance Distribution Cost Study

A 2021 analysis conducted by Conning, Inc. reconfirmed that wholesale insurance distribution does not increase the cost of the transaction to the insured. The study, which examined 2016-2020 data, found that the total non-loss cost ratio for the wholesale composite was lower than the retail composite by 1.8%. The analysis of the cost of distributing commercial insurance policies through wholesale and retail brokerage channels was conducted by Conning, Inc.’s Insurance Research Division and serves as an update to a study originally published in 2016. WSIA retained Conning, Inc. to conduct the objective analysis of the distribution costs, cost structure and ratios between the wholesale and retail channels. 

To conduct the analysis, WSIA and Conning identified two composite groups of insurance companies as a proxy for each mode of insurance distributors for selected commercial lines. Insurers that use wholesale brokers as their predominant distributors were included in the “Wholesale Composite,” and insurers that use retail brokers as their predominant distribution were included in the “Retail Composite.”

  • The Wholesale Composite was composed of 99 companies with aggregate direct written premium of $38.3 billion
  • The Retail Composite was composed of 205 companies with aggregate direct written premium of $69.2 billion.

Conning measured all non-loss costs relative to direct written premium from 2016 to 2020 for these companies. The comparison found:

  • The total non-loss cost ratio for the wholesale composite was lower than the retail composite by 1.8 percentage points. 
  • Wholesale non-loss cost ratios were lower in each year of the study, 2016-2020.
  • The wholesale composite’s commission ratio is consistently around 3 points higher than the retail composite but is offset by the wholesale composite’s non-commission cost ratios that average nearly 4 points lower than the retail composite.
  • The wholesale composite non-commission cost ratio has improved each year, while that of the retail composite increased in 2018 before improving in 2019 and 2020.
  • In each of the years measured, the annual growth rate in direct premium written for insurers in the wholesale composite exceeded the annual growth rate in direct premium written for insurers in the retail composite.