Every company wants to grow, but in a well-established industryfinding ways to do that can sometimes be a difficult task.

Identifying customers with special interests and needs–needsthat require unique insurance products and innovations–is onesure-fire way to unearth underserved market niches, createopportunities to take on more profitable risks and strengthen therelationship with clients.

The process of selecting a niche market to attract with atargeted marketing program begins with an analysis of what yourcompany has to offer.

Understand that not all market needs demand major innovations tosolve the issues at hand. Sometimes just a smaller andeasier-to-implement tweak to your product lineup is all that'sneeded.

However, be open to the fact thatsometimes big issues require big solutions. Both large and smallchanges can produce significant growth.

Here are some steps to consider:

o Modify an existing product

Repackaging existing products or services to better resonatewith consumer demand is an excellent example of a relatively smallchange that can pay huge dividends. For example, Allstate packagedaccident forgiveness, disappearing deductibles, new car replacementand safe driver discounts into Your Choice Auto. All of these wereexisting features in one or more variations, but the packagemessaging was unique and appealed to a group of risk-averseconsumers.

o Add to an existing product

Many consumers bought auto insurance and many bought roadsideassistance over the past several years. When insurers startedoffering roadside assistance instead of the then-standard limitedtowing service, they hit a chord with consumers.

Roadside assistance has now become an industry standard.

More recently, professional liability insurers have beenexpanding their offerings to include coverage for privacybreaches.

Like other modern enterprises, law firms, accounting firms andhealth care facilities all increasingly rely on informationtechnology applications and client databases to conduct theirbusiness. As a result, there is a growing need for coverage torespond to first-party response costs and liability exposuresarising from a failure to protect personally identifiableinformation from misuse or theft, as well as violations of anincreasing number of federal, state or local privacy statutes.

Another innovative expansion of coverage developed byprofessional liability program managers over the past decadeprovides coverage to physicians and health care facilities fordefense costs and fines and penalties resulting from various typesof regulatory investigations, including investigations of Medicareand Medicaid billing errors and fraud allegations.

o Use new technology

Many insurers are recognizing that telematics devices placed invehicles can revolutionize the information available for autoinsurance rating–both for private passenger and commercialvehicles.

Emerging technology is taking self-reported annual mileage froma modest idea to an entirely new pricing scheme. Data about theactual operation of the vehicle takes the place of reliance ontraditional rating variables.

Instead of using data looselycorrelated with loss costs, insurers now have access to actual,causative behavioral data. The additional services that can beoffered through the telematics technology only increase theopportunities for consumer appeal. The technology is quicklyevolving to the point that–in the not too distant future–thetraditional paradigm of roadside assistance will be turned on itsear and the car will tell the consumer something along the linesof, “I know you just ran out of gas and I can send someone from thegas station one mile away from where I already know you are.”

Additionally, telematics helps insurers reach an audience ofbetter-than-average drivers who sign up for the chance to earndiscounts. Thanks to the data provided by the innovation, autoinsurance programs literally self-select a population of safedrivers, more profitable risks.

Just last month, Hartford-based Travelers announced a program ofcommercial auto liability premium discounts for qualifying insuredsthat effectively use telematics technology to monitor commercialfleets and driver behavior. This follows at least a half dozenother companies that have launched usage-based insurance programsto differentiate themselves in both the personal and commercialauto markets.

o Exploit special expertise

Many opportunities have created ideas that have blossomed intoentire new companies. Two great examples of this are USAA, whichwas created to offer insurance specifically to armed forcespersonnel, or GEICO, originally established to provide insuranceexclusively for government employees.

But every opportunity doesn't always need to be a home run.Evaluate any expertise your company holds or special relationshipsyou personally have with your customer base. These relationshipshold special value if the expertise is hard to replicate andprovides a sustainable competitive advantage.

The high-risk markets are often fertile ground for the insurerwho has the expertise to partner with their customers and supplythe full range of required safety and insurance services. Manyinsurers shy away from transportation of hazardous chemicals, butthe insurer who understands the risks can gain significant marketshare.

Dallas-based Nobel Insurance, a division of Lancer InsuranceCompany, is an example of an entire company with a focus on ahigh-risk industry sector–the commercial explosives marketplace.The company provides casualty insurance products and services formanufacturers, distributors and transporters, as well as drillingand blasting contractors with a primary business focus within thatmarketplace.

In the area of environmental liability, there are many examplesof programs that tailor basic environmental coverages to specificclasses of insureds, such as elder care facilities or schools andother educational institutions.

o Create demand

You don't always have to create a new product or serviceoffering to reach a target audience. Sometimes you can createdemand for an existing product by simply communicating withcustomers.

Allstate regularly markets offerings such as a fraudinvestigation department and permissive use on auto policies. Manyconsumers were unaware that these are common services, and sinceAllstate was the only company marketing them, consumers turned tothe insurer because they wanted these features.

Savvy commercial specialty brokers that place liability coveragefor small businesses often realize that their customers don't haveinternal resources to handle potential employment practicesliability claims, such as in-house counsel and human resourcesprofessionals to establish risk-management policies and proceduresor rigorously document poor employee job performance. These brokersfuel demand for EPL insurance by promoting services that areadd-ons to coverage, such as loss prevention websites providingemployment procedures ready to download and use, online harassmenttraining modules, and even telephone help lines staffed by localattorneys that provide general employment guidance to businessowners.

o Pricing

Don't forget to consider options on how to deliver productofferings to clients or prospects. A feature can be priced as anadditional option at an extra cost, accounted for in the base priceor, as in the case of Progressive's Pet Insurance, simply rolledinto the product without a price change.

Progressive identified that many consumers own and have aspecial emotional attachment to their pets but had no ideaveterinary expenses for their own pet were not actually coveredwhen injured in an auto accident. Given a relatively modest limitand low incidence, Progressive was able to roll out the coveragenationally literally overnight through addition to the currentproduct at no charge, thus avoiding the necessity of state ratefilings.

DO YOUR HOMEWORK

Ultimately any time you expand your business, proper preparationand research are crucial. It's easy to get caught up in a fun, newidea, but there are important criteria to evaluate before movingforward. Determine what, if anything, your competitors are doingthat may be similar. Make sure to use company resources for thistarget market that fit with your corporate strategy. You should beable to reach the targeted audience with effective, cost-efficient,focused marketing messages.

Customer research is crucial to developing niche products.Ensure that your new target market is large enough to generatesufficient revenue to justify diverting precious company resourcesfor product development and support and that your proposedinnovation will appeal to your target audience. Don't makeassumptions. Evaluate any proposed plan with comprehensive customertesting before moving to implementation.

The ideas for innovative products abound, and many can probablybe found by asking your employees, agents and current customers.The key is to find time to focus on the steps to identify, evaluateand develop good ideas. This is critical for sustainable growth,but simply can't happen if you don't step away from the crunch ofdaily deadlines and allocate time to the critically important taskof innovating in an increasingly competitive marketplace.

Robin Harbage is a senior business consultantfor EMB America in Chagrin Falls, Ohio. He is a Fellow of theCasualty Actuarial Society and a member of the American Academy ofActuaries. He may be reached at [email protected].