Through the natural flow of an insurance practice, many individual retail agents or small to mid-sized agencies have developed areas of concentration. They successfully write homogeneous types of business through specialized knowledge of certain industries, obtaining association endorsements, or through good old-fashioned prospecting. Many agents can cultivate an established niche into a program, creating more business opportunities and greater potential for growth and profitability.

The best programs result from understanding one's local marketplace and how it relates to overall industry trends in coverage, pricing and claims experience. While there are many sound paths for an agency to elevating a niche book of business to official program status, common elements for a new program include:

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.

Armed with a growing book of business that is ideal for program status and its responsibilities, advantages and opportunities, the question now becomes, what should you look for in a carrier? As an agent, you should first research and evaluate prospects before selecting a carrier that has the resources, experience and expertise that will best support and grow your program's volume and profitability.

Here are some important carrier attributes that will help narrow your search:

1. Business model. Key issues in reviewing a carrier's business model are experience and staying power in the program arena. Does the carrier leadership and staff personnel embrace a program model? Will you have access to specialists in areas such as business operations evaluation, loss prevention or claims adjusting? Many carriers have a small program division, or move in and out of the program business. Consider how long the carrier has been in the program business and the range of programs they support in addition to your intended program niche. This will help identify a carrier with a proven track record in helping set up, support and grow programs.

Also consider the carrier's ability and willingness to customize a program to your specific class of insureds and the administrative capabilities you already possess. This last factor may be important in helping minimize your program's startup costs.

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

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

Do not underestimate the value of benchmark reporting and accurate predictive diagnostics in terms of their ability to help improve and grow your program. Larger and more experienced underwriters will generally be able to engage in more accurate actuarial and predictive modeling. The objective is targeted strategic planning on a program-by-program basis, rather than ideas based on an off-the-shelf, one-size-fits-all model.

3. Support and infrastructure. The most important characteristic to look for in a carrier regarding support and infrastructure is integration of program support as a fundamental part of the carrier's everyday operations. More specifically, consider:

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

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

o Necessary mechanisms for claims handling that fit your intended business model and organizational capabilities, including dedicated call centers, an experienced compliance team and sophisticated litigation management systems featuring vetted defense counsel

o Whether the underwriter will support your marketing and distribution efforts, including joint presentations at association conventions, introduction to new associations or other potential insureds

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

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

Within any program, even given its homogeneous class, there will be insureds whose risk profile or specific coverage needs fall outside standard or admitted markets. Thus, it is valuable to work with an organization that can provide both admitted and excess and surplus lines capabilities. Look for a carrier that can develop customized, program-specific policies and policy language instead of dealing with off-the-shelf policies from a variety of sources. With these resources, risks are better contained, and you won't have to turn away business that falls outside of your defined program criteria.

Similarly, look for carriers with access to the reinsurance marketplace. The reinsurance buying power of larger players augments their overall efficiencies and economies of scale, which filters down to product pricing.

Be cautious of overly restrictive underwriting requirements and non-competitive pricing. Unreasonable contractual restrictions or non-disclosure agreements can limit your ability to service existing clients or expand your program to new clients.

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

Next, what can you learn from the carrier? Do they have expertise–and interest–in helping you apply an enhanced discipline to areas such as loss prevention, evaluating an insured's business plans, needs and competitive status, and understanding the true costs and profitability of a book of business?

Think entrepreneurially:Will the carrier be able to help you attract new clients, expand your program geographically, or take on related programs as your own experience and capabilities grow? And does the carrier allow you to take an equity (risk-sharing) stake in the underwriting profit and investment income being produced by your book of business?

Finding the right carrier for your program and agency demands some basic due diligence, networking and a little professional common sense. There are differences in carrier business philosophy, strategic and operational support, access to admitted and non-admitted markets and performance history. Taking your carrier evaluation seriously will help you choose wisely–the first time around.

Special Reports /

The right fit: Find the Best Carrier for Your Specialty Insurance Program

Related Stories

Recommended For You