Strategic Resources for Your Insurance Agency

Why Niche Agencies Have a Huge Competitive Edge

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Agencies are increasingly finding that success lies in specializing in one or more niche markets. A 2017 survey conducted by McKinsey & Co. found that 46% of middle-market insurance agencies specialized in specific products or industries. Two-thirds of respondents expected to be specialists within five years.

Mike Furlong, CEO and co-founder of insurance software developer Indio Technologies, a software platform for commercial insurance brokers and subsidiary of Applied Systems, explains that specialists are able to tailor their marketing specifically to what they know is important to businesses in that industry. “For example,” he says, “if a broker specializes in insuring cannabis businesses, people will get to know the broker by face and name at industry events, and the broker will become ingrained in the industry.” 

In addition to marketing advantages, a niche agency has the advantage of knowing how to best place the niche risk, such as understanding the coverages that are needed, knowing the underwriting and knowing the best carriers to place the risk with. Because of this, they work the niche efficiently and win the trust of the prospects.

Specialization also affects agency value. Kevin Stipe, president of Reagan Consulting, says buyers will pay higher multiples for specialty firms. “A specialist firm is more valuable to a buyer … because it’s already performing better than its peers, it’s growing faster, (and) it’s more profitable.”

These agencies have found success by carving out niches: 

        Jill McGowan of virtual agency Apex Insurance says, “Niche is the #1 thing. I am the best example of a niche.” McGowan has a passion for motorcycles and once worked for a dealership. She has built strong relationships with dealership salespeople who refer buyers to her. “Customers like me because I’m a girl and I ride motorcycles and I write insurance on motorcycles.”

        Erin Nutting owns a specialized agency called Arizona Wedding Insurance that feeds business to her other agency, Integrity Insurance. The focus on wedding insurance, she says, locks in clients: “(Brides) are a different kind of level of intense. There’s just a loyalty between the two of you that can be developed at the time of a huge life change like that. They’ll never leave you.”

        G&N Insurance in Massachusetts credits its success to finding a niche. They were spread too thin and had a frustrated staff when they accepted all opportunities, says co-founder Matt Naimoli. After the first year, they focused on people in the homebuying process since most of their successful referrals came from realtors. The result: “Since then, G&N has grown around 30 to 45 percent each year.” Written premium has climbed to $30 million.

        Phillip Hawley, an agent in the Seattle area, had a family member who ran an international adoption agency. His relative complained that there were no insurance agents who understood his operations. Hawley formed his own agency and immediately began writing coverage for these organizations. Within four years, half the international adoption agencies in the U.S. were his clients. He eventually branched out to related organizations such as foster care agencies. His agency now has a thriving practice writing all kinds of social service agencies.

        Continental Underwriters of Richmond, Virginia writes companies throughout the country in all aspects of the forest products industry. Founded in 2013, the agency added six employees last year, bringing their staff size to 19. “We have smelled the freshly cut lumber, felt the sawdust on our face, and heard the buzzing of the saws,” their website says. “We have also seen the insurance policies, the coverage questions, and the claims.”

        Britton Gallagher, located in Cleveland, writes mainstream property-casualty business, but they also have niches in the pyrotechnics and life sciences industries. They write more than 100 pyrotechnics accounts throughout the country. 

These agencies show that specialization can bring great rewards. When it comes to their life’s work, people prefer to buy insurance from those who know their businesses.

 

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