Is Insurance Specialty in Your Future?

Should you be an insurance specialist and build a niche practice focused on a single industry vertical? Or is it better to be a generalist and know a little about many industries so you can sell to a larger market?

These are questions with no right or wrong answer. But in recent years, the tide has been turning toward specialization.

The latest Future One Agency Universe Study revealed that almost half (46%) of independent insurance agencies specialize in a vertical. Of those who have a niche:

  • 26% focus on construction and contracting;
  • 16% focus on restaurants;
  • 12%; focus on agriculture; and
  • 12% focus on transportation.

There are many benefits to specialization. One is less competition, since there will be fewer agents writing business in your niche. Another is that you may create deeper, lasting relationships with clients — you know their industry, and they trust your expertise. Still another advantage is the strategic relationship you can build with specialty insurance carriers.

Specialists may have the upper hand, too, as insurance products become more commoditized. To stay competitive, agents need to find ways to add value. Specialists have risk management knowledge for a particular niche that can lead to better underwriting and stronger outcomes for the carrier, and better profitability for the broker that ultimately builds value for the agency.

However, the advantages of specialization are only good if the niche is viable. If you specialize in restaurants, COVID-19 has probably taken a bite out of your revenue. Those who are agile and can quickly move into an allied niche may be doing okay. You want to avoid being placed in a difficult spot.

Become a specialized generalist

One solution is an approach where you pursue a T-shaped career. Think of the vertical part of a “T” as the time you invest in acquiring in-depth industry knowledge. The top horizontal part of the T is when you use that knowledge to branch out into specializations and management roles.

Throughout your career, you may get experience in several vertical areas and multiple lines of insurance. I’ve worked with many agency owners who’ve built very successful firms. Some are generalists, running retail agencies that serve a broad market. Others have specialized in a particular vertical or commercial line. While there is no one right path to success, we have noted that agencies with specializations can be more efficient, have a wider reach, are more profitable, and, as a result, build more value over time.

Think about where you’d like your career to take you. Looking back from the vantage point of a successful agent is a good approach to planning. Ask an older agent what counsel they might have for someone starting out who wants to build a successful career as an agent.

This often-heard advice may seem a bit worn, but it still rings true: “Do what you like to do. Do what you’re good at.” If you’re going to specialize, choose an industry you can believe in and support with passion.

Three ways to become an insurance specialist

There are many ways to build a specialty practice. Here are three approaches you might consider:

  1. Provide specialized services to a broad range of customers: Focus on just one or two lines of business that you sell to many markets. Example: pollution legal liability.
  2. Provide specialized services to a specific industry vertical: You can specialize even further by selling just one or two products to a single industry. Example: builder’s risk.
  3. Provide a broad range or services to a specific industry: Think about becoming a full-service agency for a single industry. Example: all lines of coverage for doctors and nurses.

Points to ponder as you plan your career

Consider these other bits of wisdom from those who’ve been there:

  • Get involved in your vertical. Being active in the chamber of commerce or a charity is a good way to build relationships in your community. But to build relationships in a specialty, you need to immerse yourself in the same activities of your potential clients. Attend industry meetings, take courses and support the specialty as an associate member of the trade group. In-person activities may have been put on hold during COVID, but there are lots of virtual ways to learn and become involved.
  • Create value for your agency. Besides producing more revenue, what else can you do to help your agency grow? By being a specialist, you will be more attractive to an agency since you may bring new sources of income and enhance its bottom line. Your value to an agency could be rewarded with an ownership opportunity.
  • Aspire to be an owner. Not every insurance agent will be an agency owner. However, the most successful agents are those who understand the road to wealthy is paved by ownership. Hone your skills and keep an eye out for management opportunities, and your specialty may yield dividends through agency ownership.
  • Don’t put all your eggs in one basket. The pandemic has demonstrated that certain specializations can have drawbacks. Hospitality, energy, travel, and entertainment businesses have been hit hard. Try to build verticals that are not so highly correlated that a downturn in one industry impacts your entire portfolio.
  • Seek a mentor. Owners often regret not spending more time mentoring younger agents and grooming someone in their agency for future leadership. Don’t be afraid to ask an agent you admire for career advice or help you identify a specialty area. Successful agency principals are often very willing to share their thoughts and ideas.

There’s no single path to specialization. Find an insurance line or industry vertical that matches up with your talents and interests, and then go after it. You’ll find working in a niche can be rewarding and profitable.

Article By: Robert Pettinicchi

Source: NU Property Casualty 360