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In certain cases, a retail insurance agent may not be able to acquire an insurance policy that meets an individual's specific needs. In this situation, the retail agent contacts an insurance wholesaler. At this point, the retail agent becomes the client of the wholesale broker.
The retail agent tells the insurance wholesaler of the insurance buyer's needs and seeks out an insurer. Wholesalers maintain large databases of niche insurance companies that are unknown to most people. Once a suitable company is found, the wholesaler acts as an intermediary between the insurance company and the retail agent. The retail agent then reports back to the insurance buyer as negotiations begin.
Wholesalers provide legal knowledge. Most states have
extensive laws and regulations concerning wholesale and niche insurance that retail agents have little knowledge of. The retail agent doesn't have the time or resources to learn all of the policies and regulations of the wholesale insurance market.
For each party involved to receive the best value possible, complete transparency is required. Because retail agents most likely won't have contact with the company providing the insurance, they must rely on the wholesaler's expertise and recommendations of the wholesaler. Likewise, the wholesaler won't have contact with the insurance buyer and must rely on the retail agent's knowledge of the buyer. This complex relationship between the buyer, retail agent, wholesaler and insurance company requires honest and open communication. A communication breakdown may be reflected in the final price.