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

Of course, putting together a program for a particular segmentis always the preference. However, as most underwriters will tellyou, it helps to start out with a group of clients ready to takepart in it. That way, there is adequate “critical mass,” whichgives the agent and proposed program credibility in the eyes ofinsurers. If a broker has already successfully targeted aparticular sector and has developed a significant client base, thenhalf 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. Indeveloping these programs, we have made use of purchasing groups.Congress authorized them, as well as risk retention groups, in the1981 Product Liability Risk Retention Act and the 1986 LiabilityRisk Retention Act. Purchasing groups allow groups of insurancebuyers with similar risk characteristics to band together topurchase various lines of liability insurance from one underwritervia one master insurance policy. The theory is that a group'scollective purchasing power results in reduced insurance costs perbuyer and more leverage for the broker working on the group'sbehalf. The purchasing group insurer (or a consortium of insurerson a layered program) issues a “master” insurance contract.Certificates of insurance are then issued to each buyer desiringcoverage through the purchasing group.

This approach did indeed result in reduced insurance costs perbuyer and became popular with real-estate clients, a particularlyprice-driven segment. Recognizing the opportunity in a segment inwhich we already were successful, we created purchasing groups forthe various coverages needed by real estate clients, primarilygeneral liability and umbrella liability insurance.

As we developed our programs, it helped that we already werewell-known in the real-estate community and already had severalsignificant clients on the books. Our strategy was to targetbuilding owners and managers, particularly those in areas of NewYork City that many insurers shied away from. We used referrals,extensive advertising, participation in trade shows, etc., tospread the word.

We also developed expertise in environmental insurance issuesaffecting real-estate clients, hiring a specialist to spearheadthis effort. Thanks in part to such actions, we became identifiedby both insurance buyers and carriers as experts in the field, oneof just a few insurance brokers in the area to be viewed in thatlight. Today, our real-estate client base includes more than 5,000residential apartment buildings in the New York region, and morethan a billion square feet of commercial-real estate space.

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

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

Often an agent, having demonstrated success and a competitiveadvantage with one business segment, will look to translate thatsuccess to another. The new target segment is usually expected togrow significantly in the near future or thought to havehistorically been underserved. The question then becomes, can thesame marketing strategies a broker used successfully in developingone segment work in another?

Usually the answer is “no.” Advertising, promotion and publicrelations usually are not sufficient. For many specialized sectors,industry knowledge, insurance product expertise and goodold-fashioned effective insurance brokering are still the mostimportant factors to clients-and to the service providers who canopen the door to prospects. If, for example, a broker decides totarget the construction sector, then all the advertising in theworld will not guarantee success. Rather, industry knowledge,knowing the particular “personality” of contractors, and insuranceproduct expertise (along with the ability to offer a competitiveproposal) are key.

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

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

Robert C. Meder is vice president and sales director at KayeInsurance Associates Inc., a broker that does business on both aretail and wholesale basis. Kaye Insurance Associates is a memberof Hub International. Mr. Meder can be reached [email protected]..