Should An Agency Specialize or have a Niche?

[AgencyEquity]

Agencies that specialize tend to have an edge in specific markets. While most agencies do not specialize, I recommend giving specialization some thought, as it can bring in higher profit margins due to economies of scale. Specialization also means, however, that you will turn away accounts that are not among the types of business you target.

I like specialization from a marketing standpoint, as there are many opportunities to get involved in trade associations, target online searches, or advertise in trade industry publications. You can gain a solid reputation in the class of business you target, as industry insiders would rather deal with people who are familiar and understand their specific situation. It also facilitates referrals, as people in the same niche industry tend to know and network with each other.

Even if you don’t specialize, have you thought about narrowing your focus? Examples include high-networth clients, member of a local chamber of commerce or any group that shares specific characteristics. Just as with specializations, it will help in operations, marketing, and your bottom line. Lastly, remember that direct writers mostly do the same thing, providing auto, home and life insurance to middle-class clients. These services are a dime a dozen, so standing out and being a little different eliminates a lot of the competition.

[robmejia]

Yeah I agree with you. Marketing for a certain niche is definitely more effective. And have a unique offer to acquire and retain customers.

[bkrigsman]

Although in some ways it is beneficial to have a Niche, if this specialization goes south, it could cost you. For instance, my (2) former employers specialized in the construction arena. Well, due to the economy not much construction going on so they lost or reduced a big part of their business. So there are pros and cons to specialization. A more diversified book of business will balance out in times like this.

[AgencyEquity]

Although in some ways it is beneficial to have a Niche, if this specialization goes south, it could cost you. For instance, my (2) former employers specialized in the construction arena. Well, due to the economy not much construction going on so they lost or reduced a big part of their business. So there are pros and cons to specialization. A more diversified book of business will balance out in times like this.

Contruction is not the best way to go for a specialization, though I realize many agencies specialize in this. I would pick a more stable industry, like the medical industry.

[roycheong1031]

Yes, I totally agree for an agency to have a specialize field in their agency, because if you don't have anything that is stand out in the agency's specialty, most likely it will be drowned by other competitor agency then.

[agencyideas]

I wrote a column on this very topic in the 9/19/11 issue of Insurance Journal magazine. Here's the link to it... http://www.insurancejournal.com/magazin ... 216243.htm Alan Shulman

[jimmyr1978]

2-3 industry specialties seems to be a safer bet. Just as you should diversify your investment portfolio, diversification of niches also makes sense. For example, I focus on 3 unrelated industries. This year, my main program for one of the industries is non-renewing many accounts due to poor loss experience nationwide. I'm losing some of these accounts to a direct writer who is under-cutting my pricing substantially, though I've commanded the increased price in some cases where the insured saw value in my industry knowledge. Thankfully, one of my other industries is heating up. It's not too much to juggle, though the marketing/advertising investment is higher - I'm a member of trade associations for all three groups, and the cost of membership dues, trade shows, etc. do add up.

[FurriePrincess]

I spent 25 years working in an agency that was primarily a niche market specializing in one area. However, we also made it a practice to write all of a client's exposures, personal, primary business, benefits, and any secondary risks such as investment properties or other ventures.

When there was a hard market, we were one of the go to markets for our speciality. When times were softer, we still had a good market, but also had the other areas which helped a lot in keeping up a steady flow of business and income for the agency.

I would recommend any agency that decides to specialize, to keep an open mind about their client's needs for all types of insurance. If you are providing good service for all areas, your clients are loyal and will stick with you as they know you are keeping their best interests mind, not just a low price on your primary business.

[meadowdude]

I've been involved in writing a few articles on the subject of program specialization; here is a good starting point, for those agents wishing to explore this topic a bit more: http://www.propertycasualty360.com/2008 ... -a-program--Phillip J. Gajewski, CPCU, ARM

[AgencyEquity]

Yes, I totally agree for an agency to have a specialize field in their agency, because if you don't have anything that is stand out in the agency's specialty, most likely it will be drowned by other competitor agency then.

I had a terrific entreprenuership instructor in college, he said if you really want to succeed, be different. Otherwise you will be competing with everyone else all day long. Those who are different are able to make more $$$ per hour of work because they will have a clients coming to them specifically because of their niche, they will also have efficiencies built in, they know exactly which markets to go to in a particular situation and probably know the ins and out of brining down the premium. Also underwriters really like it when an agency had a niche and are willing to work more so with you or even give you the pen on the niche, especially if you have a great loss ratio.

[chizcurlz]

I agree. Specializing a specific niche is much easier than selling different kinds of insurance. By this mean, an insurance agency can be focused on their products and they can easily prioritize the needs of their customers.

[dm307799]

From an E&O perspective!

http://www.agentseotips.com/2012/01/is- ... rspective/

[William Graham]

I want to thank Agent Equity for posting this thread
It brought out some great commentary and the articles cites were great.
I have come back to this article several times to re-read all the posts - I have
gained a fresh perspective on this topic.

Our agency is a small start up personal lines IA agency- I was a captive agent starting
in 1987 and went IA 2 years ago.

What I have come away with so far is that we need to specialize but not to put all of our
eggs in one basket

Our commercial business so far has been 90% walk in and the result has been a net negative.
We need to start saying no to the Roofers, small contracters that need a couple of certificate
of insurance & then lapse out with chargebacks etc.
We need some commercial to balance out our cash flow etc. as well as help augment
our growing personal lines book but not the kind we have done to date.

I am spending time researching some divergent commercial areas I have some business experience in.
Obviously,as a start up, we don't have any commercial appointments now our existing policies are
through a couple of GA/E&S and our cluster's master agency. Eventually our goal would be to get
a couple of carrier appointments or sub codes with our Master agency
that are competitive in the areas we wind up specializing in.
The end game may wind up different than our current intentions but
now I have an idea on how to begin targeting as well as the importance I need to attach to targeting & speicalization.