In the rapidly changing commercial Property & Casualty insurance industry, specialty insurance programs have been one of the fastest-growing segments.

Over the past five years, revenues from specialty program business nearly doubled. In order for the program segment to sustain such growth, it will need to evolve. Part of that evolution must involve wholesale generalists building and developing their skill sets to include the ability to function as a specialty program administrator.

More and more generalists are getting into specific market segments. Many of them are wholesalers who have not specialized in a particular segment of business in the past. These wholesalers have examined their books of business, identified certain specialty segments of business, and developed an understanding of what they have to offer in the form of customized coverages and competitive pricing. 

This successful transition has allowed these wholesalers to grow their businesses in an area they have not focused on previously. They also have been able to bring additional value to their organizations by building underwriting expertise in house. Often, they have realized additional compensation for their segment expertise and underwriting involvement, as well as for backroom operations, such as rating, quoting and policy issuance. These generalists of the past have now created a new avenue of growth by becoming industry experts in a specific class of business. This approach also allows them to share in the profitability of the program through various profit sharing agreements.

Wholesale insurance organizations are looking at the program sector as a potential engine of growth. While doing so, they are taking a detailed look at their business, seeing where they have expertise and looking to carve out a niche. They are not going to throw away their core business, but this is an excellent way to build on what they already have and grow their business.

The process of turning a generalist insurance business into a specialty commercial insurance program is a complex effort. Wholesale insurance professionals can follow these steps to find a niche area for growth:

  • Look closely at the different segments of business your company writes. Do you have a de facto specialty in a certain segment? For example, do you find you are writing a great deal of business for restaurants?
  • Determine if any of these segments have a healthy amount of written premium. A good starting point is $5 million of premium in one segment.
  • Ask whether that segment is niche. It is not enough to identify restaurants as a niche. Instead, seek to narrow it down by a specific type of business in a particular region. For example, a niche segment may be fast-food franchises in the Midwest. Ideally, having relationships with trade groups, associations, specialty retailers or other connections in the segment will support your expertise and knowledge.
  • Gather detailed premium and loss data for the past three to five years on that book of business. Determine if that segment is a profitable book of business.
  • Build a program submission that includes an executive overview, underwriting guidelines with rating model, suggested policy forms and premium and loss data for a number of years.
  • Ensure that your underwriting skills are specific to the lines of business and segment that you are building. Validate your capabilities in submission handling, policy administration and reporting.

The industry recognizes this trend toward specialization and the needs of insurance organizations transitioning toward providing niche products. Gathering the premium and loss data, determining if your proposed book of business is profitable and building out a program submission may be beyond the skill set of your current team, and that's OK. Intermediaries or consultants are available to help you build a submission and get insurance carriers on board.

Various professional organizations are also finding ways to support these changes. For example, the American Association of Managing General Agents has expanded its membership to also focus on the specialty program segment in order to better provide exclusive benefits and support for the wholesale insurance professionals that hope to take advantage of this growth opportunity. The opportunities and support systems are there; it is now up to wholesalers to rise to the occasion.

Brian Molusis, CPCU, ARM, is president and founder of Glastonbury, Conn.-based Vital Insurance Partners LLC, a privately held insurance intermediary and consulting firm that focuses on the specialty insurance marketplace.

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