If you’re not already broking niche insurance, start looking for your new specialty coverage.
Why? Because niche brokers make more money, their agencies are more profitable, more valuable, and – and this might be the kicker – they enjoy their work more.
In fact, specializing in a niche is near-enough a do-or-die decision in the current marketplace, said Kevin Stipe, president of Reagan Consulting. Simply put, finding your niche is the thing that could save your business.
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“It’s pretty darn important in today’s world,” he said. “If you’re a generalist battling a bunch of specialists, that’s a uniquely horrible position to be in, competitively.”
Plus, in the current M&A market, potential buyers will pick a specialist over a generalist every time, Stipe said.
“A specialist firm is more valuable to a buyer … because it’s already performing better than its peers, it’s growing faster, it’s more profitable … and buyers will pay a higher multiple for specialty firms because they believe the prospects are better than they are for a generalist firm,” he said.
“This has been a trend that’s been going on for a long time. But now, with the advent of the technology investments that are going on in our industry, we are about to see an accelerated move towards agencies specializing.”
In small towns or rural areas, Stipe conceded, generalist agencies can thrive with less competition. But in a crowded market, differentiation is key.
“Ultimately,” he said, “the generalist is going to become a dinosaur.”
Gone are the days of just relying on a customer stream to turn up at your office door, said Brent Kelly, an insurance consultant with Sitkins Group in Illinois.
Customers want expertise – they want to know the broker knows about their interests and knows about protecting them.
“Specialists get paid more for a reason – because they know more about a specific industry and they get closer to a specific industry and they emotionally connect with a specific industry. You want to work with a broker who is good at something and is known for being good at it,” Kelly said.
“When you look at ‘survive’ or ‘thrive’, there are a lot of agencies that will be able to ‘survive’ without having a niche … but I really do believe that for any agency to truly ‘thrive’, to really ramp up revenue numbers, they’re going to have to be known for something.”
So, if you’re reading this and are looking to create yourself a niche, what should you do?
Kelly said many generalist agencies considering change may, in fact, already feed a niche within their business – it might just be a matter of zeroing in on what you’re inadvertently already winning.
“What kind of industry and clients do you like to deal with? You may already have a niche or two or three if you actually comb through your book of business,” he explained.
“You’ve got to make sure you’ve got the markets that support you. [But] if you are passionate about a niche and you like to learn about it, then work becomes kind of fun. You deal with the right people, you target the right clients, you make more profit. At the end of the day, you get paid more and you enjoy what you’re doing.”
Sean Thompson, president of Dolphin Insurance Services, a niche marine brokerage in Burnaby, British Columbia, knows the benefits of working in a niche you love.
“Insurance is pretty boring, right? But insuring boats, oh man, it’s cool,” he said.
“There are so many different types of boats. And when that phone rings, you have no idea who’s going to be on the line. It could be this diesel-stinking guy with a broken-down tugboat, or it could be somebody with a $4 million yacht. It just became cool for me.
“If you’re passionate about something and people enjoy talking to you, then word gets out there. We’re boaters ourselves. And now people flock to us – they’re not happy with the service they’re getting from their regular broker, because this is such a specialized market.”
Aside from loving his work, niche insurance has additional positives, Thompson said.
“Because we’re niche, we’re not a threat to any other brokers,” he noted. “So a broker that is insuring [a client’s] business, their house, their car, and then they hear, ‘And I’m buying a $2.5 million boat’ … they’ll phone us up and say, can you look after this client … with the understanding that I’m not going to start sneaking in and stealing all that other business from behind the scenes.”
At a point a few years back, as business began to grow, Thompson said the company flirted with offering more general products to their clients. But that involved competing with other brokers and trying to steal business, and it didn’t work out. So, instead, he took the company further niche.
And it’s worked out for the brokerage, he said: “Underwriters are [now] coming to us trying to get us to sell their niche products that they can’t seem to get into the market but which they know is a good product.
“So we’re like, ‘To hell with the house insurance, auto – anybody can sell that. Let’s find products that people come to us for’. And it’s working. It’s working real well.”
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