It can be tough for insurance brokers to break into specialty markets. Specialty businesses require more technical knowledge of their unique risks.
Moreover, it can be challenging for brokers to generate sustainable profit from small and medium-sized enterprises (SMEs) who pay lower premiums and therefore provide lower commission.
But brokers who specialize have a distinctly higher chance of success than those who are more generalist, according to Kevin Lea (pictured), president and co-founder of Fuse Insurance.
Lea, who is set to speak at the Specialty Insurance Summit in Toronto next month, is confident that brokers who take the plunge into niche industries may find it highly rewarding.
“There’s a learning curve when it comes to different niche industries, whether that's cannabis, craft brewing, crypto or other types of technology-driven and e-commerce businesses,” Lea said.
“Brokers who learn these industries will have the best chance of success in operating within these new types of businesses.”
Calgary-based Fuse Insurance was founded in 2017 by Lea and Simon Hlywa. With Lea’s background in insurance and his co-founder’s expertise in software engineering, they decided to focus on niche insurance products for SMEs using a digital platform.
Fuse offers coverage for Amazon sellers, non-profits, cannabis, craft brewing and distilling, vape and e-cigarettes, and landscaping, among other industries.
Their platform, Calefy, has spun off into its own insurtech company that generates quotes for brokers, MGAs and insurers.
For Lea, technology creates a distinct edge for brokers operating in specialty markets. Digital platforms can do all the heavy lifting when it comes to data entry and mundane paperwork, leaving brokers free to find and close deals.
“Traditional brokers, especially those who cater to small and medium-sized businesses, have always done things in a very generalist manner, so their applications and their processes aren't targeted towards niche industries,” he said.
The result of this old-school approach is a lack of focus that hinders brokers from deeply understanding the market and getting positive results with insurers.
“Brokers are going to struggle with obtaining quotes and getting the right coverage in place for these specialist businesses,” Lea explained.
“We know there are a lot of brokers that try to stand out from the pack. But for that, you need to be doing things a bit differently, which is why our twin focuses on great technology and niche industries have helped make Fuse successful.
When it comes to working with underserved industries, is it better for brokers to little or a lot of competition?
According to Lea, there are benefits to having other brokers with whom to fight for business.
“Competition does add legitimacy to newer insurance products in newer sectors,” he told Insurance Business.
“Because most brokers don’t cover every corner of the country, having a good selection of brokers across Canada ensures that businesses from Newfoundland to BC are able to find someone relatively local to handle their needs and get the insurance coverage that they require.”
The insurance leader instead encouraged other brokers aiming to establish themselves in the specialty market to engage with their competitors.
“I think it's important for brokers to network within the community, whether that's through their provincial broker association or through more informal local groups,” he said.
“Maybe the area [you want to operate in] is already heavily served, or it’s underserved, and you’ll have an easy time getting in. Knowing what your competition is up to is helpful.”
This friendly “co-opetition” not only helps brokers ease into specialty businesses, but it also improves the overall insurance experience for their clients.
“It works well to be friendly with your competitors, too. We at Fuse get a lot of referrals from other brokers for areas that we trade in, and we send leads in personal lines to other brokers,” Lea continued.
“It becomes a good working relationship and strengthens the insurance experience for the policyholder because they know that even if they do get referred to someone else, they know that broker to is going to be an expert.”
Insurance Business Canada is bringing the biggest names in speciality insurance together at the first-ever Specialty Insurance Summit on April 27, 2023 at the Arcadian Loft Toronto. Register now.