Through the natural flow of aninsurance practice, many individual retail agents or small tomid-sized agencies have developed areas of concentration. Theysuccessfully write homogeneous types of business throughspecialized knowledge of certain industries, obtaining associationendorsements, or through good old-fashioned prospecting. Manyagents can cultivate an established niche into a program, creatingmore business opportunities and greater potential for growth andprofitability.

The best programs result from understanding one's localmarketplace and how it relates to overall industry trends incoverage, pricing and claims experience. While there are many soundpaths for an agency to elevating a niche book of business toofficial program status, common elements for a new programinclude:

o Proven loss history, ideally of at least 5 years
o Expertise in the class of business
o Established distribution system
o Stability in past carrier relationships
o Competitive market intelligence.

Related: Read “Small is beautiful”

Armed with a growing book of business that is ideal for programstatus and its responsibilities, advantages and opportunities, thequestion now becomes, what should you look for in a carrier? As anagent, you should first research and evaluate prospects beforeselecting a carrier that has the resources, experience andexpertise that will best support and grow your program's volume andprofitability.

Here are some important carrier attributes that will help narrowyour search:

1. Business model. Keyissues in reviewing a carrier's business model are experience andstaying power in the program arena. Does the carrier leadership andstaff personnel embrace a program model? Will you have access tospecialists in areas such as business operations evaluation, lossprevention or claims adjusting? Many carriers have a small programdivision, or move in and out of the program business. Consider howlong the carrier has been in the program business and the range ofprograms they support in addition to your intended program niche.This will help identify a carrier with a proven track record inhelping set up, support and grow programs.

Also consider the carrier's ability and willingness to customizea program to your specific class of insureds and the administrativecapabilities you already possess. This last factor may be importantin helping minimize your program's startup costs.

2. Expertise. Start by identifying carriersthat have expertise in your program's specific line of coverages.Consider the prospective carrier's performance history with respectto volume and profitability in the specific program (e.g., workers'compensation, general liability, E&O, etc.). Are these books ofbusiness growing or shrinking? Has profitability been consistent,or have there been frequent challenges along the way that wereindependent of known industry cycles? Much of this information canbe found in a carrier's annual statement or statutory filings, suchas a company's annual Yellow Book.

A carrier's existing experience with a specific program willcertainly encourage and facilitate any new relationship. However,don't necessarily rule out those carriers without specific programexpertise. They could possess outstanding experience andcredentials in program insurance that could translate well into newprograms.

Do not underestimate the value of benchmark reporting andaccurate predictive diagnostics in terms of their ability to helpimprove and grow your program. Larger and more experiencedunderwriters will generally be able to engage in more accurateactuarial and predictive modeling. The objective is targetedstrategic planning on a program-by-program basis, rather than ideasbased on an off-the-shelf, one-size-fits-all model.

3. Support andinfrastructure. The most important characteristic to lookfor in a carrier regarding support and infrastructure isintegration of program support as a fundamental part of thecarrier's everyday operations. More specifically, consider:

o The carrier's resources and fluidity in informationtechnology, including such areas as data transmission, storage andsecurity; Web and e-mail messaging; online policy applications; anda dedicated agent and insureds intranet

o Level of existing offices, programs, systems and affiliationsto provide underwriting, compliance and reinsurance support

o Necessary mechanisms for claims handling that fit yourintended business model and organizational capabilities, includingdedicated call centers, an experienced compliance team andsophisticated litigation management systems featuring vetteddefense counsel

o Whether the underwriter will support your marketing anddistribution efforts, including joint presentations at associationconventions, introduction to new associations or other potentialinsureds

o Whether the carrier maintains a “centralized ivory tower”approach versus a decentralized regional network of supportingoffices, to service the local needs of your insureds and you. Howhard is it to get someone “on the line”? Will they have the answersand support you need?

4. Capabilities and operational flexibility.When it comes to capabilities and operational flexibility, youshould be concerned with two key issues: placement and pricing.

Within any program, even given its homogeneous class, there willbe insureds whose risk profile or specific coverage needs falloutside standard or admitted markets. Thus, it is valuable to workwith an organization that can provide both admitted and excess andsurplus lines capabilities. Look for a carrier that can developcustomized, program-specific policies and policy language insteadof dealing with off-the-shelf policies from a variety of sources.With these resources, risks are better contained, and you won'thave to turn away business that falls outside of your definedprogram criteria.

Similarly, look for carriers with access to the reinsurancemarketplace. The reinsurance buying power of larger playersaugments their overall efficiencies and economies of scale, whichfilters down to product pricing.

Be cautious of overly restrictive underwriting requirements andnon-competitive pricing. Unreasonable contractual restrictions ornon-disclosure agreements can limit your ability to serviceexisting clients or expand your program to new clients.

A shared vision.Your carrier should have a clear interest inhelping grow your program as a profitable, long-term book ofbusiness. For starters, consider whether the carrier can help youclearly articulate the goals of your program–strategically,operationally and financially.

Next, what can you learn from the carrier? Do they haveexpertise–and interest–in helping you apply an enhanced disciplineto areas such as loss prevention, evaluating an insured's businessplans, needs and competitive status, and understanding the truecosts and profitability of a book of business?

Think entrepreneurially:Will the carrier be able to help youattract new clients, expand your program geographically, or take onrelated programs as your own experience and capabilities grow? Anddoes the carrier allow you to take an equity (risk-sharing) stakein the underwriting profit and investment income being produced byyour book of business?

Finding the right carrier for your program and agency demandssome basic due diligence, networking and a little professionalcommon sense. There are differences in carrier business philosophy,strategic and operational support, access to admitted andnon-admitted markets and performance history. Taking your carrierevaluation seriously will help you choose wisely–the first timearound.