What Is An Outside Producer?

The Property Casualty world is different from the A&H world in many ways. For example, when you have lunch with a P&C carrier, You Pay For Lunch. But, when you have lunch with an A&H carrier, They Pay For Lunch.

Many P&C agents, such as many in South Texas, are small shops with maybe one or two employees. Their book of business is small and limited. But that is OK, because once a P&C account is landed, and the commissions come in, many spend most of their time on the golf course. Life is good at 15-50% commission levels.

But the problem for the small P&C producer is they can’t even succeed in getting a P&C carrier to agree to have lunch with them, much less pay for it. How does a P&C agent get access to the P&C Blue Book Market?

The small P&C agent has no problem in finding markets for auto, home, etc., through a few carriers. but what about those large political subdivisions or other unique risks that the P&C small time agent stumbles upon every once in a while? His carriers wont touch them. And the big carriers wont do business with him either – there is no on-going relationship or volumn or book of business with the big boys. He cant get in the door without an introduction by a large P&C brokerage that has clout, i.e, large volumn of business with the carriers and long on-going business relationship.

There is only one way to do so – they become outside producers for such firms as Marsh, HRH, McGrief Seibles, among other big national brokerage firms. An out-side producer agreement can be a single case agreement or a generalized on-going agreement to capture future business for both entities.

In the political subdivision arena, these agreements become apparent  in most cases only when the contract is awarded and contracts are presented for signature.

Conflict of Interest problems have been known to arise when a political subdivision retains a large national brokerage firm as a fee-based insurance consultant to review cover placed or to be placed with any number of outside producers with whom the brokerage/consulting firm has a relationship with.

A good purchasing manager will develop specifications to address these kinds of Conflicts of Interest .

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