WHAT is the next “big thing”? Like investors, insurance agents and brokers are constantly searching for the next fast-growing business segment to target. Insurance sales managers always want to give their staffs a growing business segment to pursue, while their marketers then struggle with insurance company underwriters to convince them to write the business competitively.

Of course, putting together a program for a particular segment is always the preference. However, as most underwriters will tell you, it helps to start out with a group of clients ready to take part in it. That way, there is adequate “critical mass,” which gives the agent and proposed program credibility in the eyes of insurers. If a broker has already successfully targeted a particular sector and has developed a significant client base, then half the job of creating a profitable program is done.

Our firm had such historical success in the real estate sector, which we first targeted and later created programs for. In developing these programs, we have made use of purchasing groups. Congress authorized them, as well as risk retention groups, in the 1981 Product Liability Risk Retention Act and the 1986 Liability Risk Retention Act. Purchasing groups allow groups of insurance buyers with similar risk characteristics to band together to purchase various lines of liability insurance from one underwriter via one master insurance policy. The theory is that a group's collective purchasing power results in reduced insurance costs per buyer and more leverage for the broker working on the group's behalf. The purchasing group insurer (or a consortium of insurers on a layered program) issues a “master” insurance contract. Certificates of insurance are then issued to each buyer desiring coverage through the purchasing group.

This approach did indeed result in reduced insurance costs per buyer and became popular with real-estate clients, a particularly price-driven segment. Recognizing the opportunity in a segment in which we already were successful, we created purchasing groups for the various coverages needed by real estate clients, primarily general liability and umbrella liability insurance.

As we developed our programs, it helped that we already were well-known in the real-estate community and already had several significant clients on the books. Our strategy was to target building owners and managers, particularly those in areas of New York City that many insurers shied away from. We used referrals, extensive advertising, participation in trade shows, etc., to spread the word.

We also developed expertise in environmental insurance issues affecting real-estate clients, hiring a specialist to spearhead this effort. Thanks in part to such actions, we became identified by both insurance buyers and carriers as experts in the field, one of just a few insurance brokers in the area to be viewed in that light. Today, our real-estate client base includes more than 5,000 residential apartment buildings in the New York region, and more than a billion square feet of commercial-real estate space.

In successfully targeting a client segment, agents and brokers look at many factors, such as the segment's growth potential, its demographics, it's coverage problems and legal issues, the insurance marketplace climate, etc. Once a segment has been chosen, several strategies can be used to develop it:

?Advertising. Advertising is most effective with two distinct business-segment profiles: a price-driven segment, such as real estate; or a “new” sector, such as the “dot-com” industry several years ago, whose members are learning the ropes and searching for new service providers and vendors.
?Spheres of influence. Cultivating relationships with a segment's service providers, like lawyers, accountants, etc., can lead to referrals and introductions to prospects.
?Industry trade shows. These can be excellent sources of lead generation, particularly in a price-driven business segment. Networking at such shows and “working the floor” can also provide excellent market intelligence.
?Articles. If an agent or broker is targeting a specific segment, there is no better way to reach clients than to write an article (ideally about insurance) for one of its publications. Editors often will accept a “guest” expert article or even regular contributions, if they think they will benefit readers.
?Networking organizations. Participating in networking organizations in a given segment can be worthwhile, especially if the agent or broker can arrange to have a speaking engagement.

Often an agent, having demonstrated success and a competitive advantage with one business segment, will look to translate that success to another. The new target segment is usually expected to grow significantly in the near future or thought to have historically been underserved. The question then becomes, can the same marketing strategies a broker used successfully in developing one segment work in another?

Usually the answer is “no.” Advertising, promotion and public relations usually are not sufficient. For many specialized sectors, industry knowledge, insurance product expertise and good old-fashioned effective insurance brokering are still the most important factors to clients-and to the service providers who can open the door to prospects. If, for example, a broker decides to target the construction sector, then all the advertising in the world will not guarantee success. Rather, industry knowledge, knowing the particular “personality” of contractors, and insurance product expertise (along with the ability to offer a competitive proposal) are key.

Of course, hiring a producer with expertise in a given segment is usually a good way to develop business in it. In such cases, insurance experience is not always required. Sometimes the most successful producer in a particular niche has little insurance experience but rather has the contacts needed to develop business.

Strategies like those outlined in this article have helped us develop business in a number of segments. They can help put your efforts to cultivate a niche right on target too.

Robert C. Meder is vice president and sales director at Kaye Insurance Associates Inc., a broker that does business on both a retail and wholesale basis. Kaye Insurance Associates is a member of Hub International. Mr. Meder can be reached at rmeder@kayegroup.com..

Special Reports /

Developing Programs for the real-estate market

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