Insurance producers tend to fall into one of two categories with respect to their approach to the marketplace, usually engaging with prospects and clients as either a generalist or as a specialist. While there are advantages to both, it is critical for agencies and producers to reassess their positions due to dramatic disruptions in the marketplace.
Operating as a generalist has always had a strong appeal: not being restricted to certain industries or lines of business and being available to all opportunities in the marketplace. Even historically, insurance agencies have marketed themselves as a “One Stop Shop” where all insurance needs can be handled. What is common is that agencies with a lack of experience will gravitate towards less hazardous or less complex accounts. Whereas high hazard and complex accounts, by their nature, require specific expertise and that expertise is accompanied by a higher learning curve.
But now generalists must be aware that they face a number of serious emerging risks that were not present just a few years ago. Carriers are interacting more directly with customers, at lower cost and often with more consistent service levels. The once clear division between agent and carrier is diminishing, but agent commission structures remain largely unchanged. So generalists must ask themselves:
“Who is more likely to change from a traditional agent model to an internet based, or other alternative model?”
It is reasonable to assume that it is far less likely for those companies who need specialized expertise to move to an alternative distribution source, than those who perceive themselves as a “One Stop Shop” company.
Additionally, threats to generalists include the emergence of non-traditional players who are either entering or gaining greater market share in the insurance space. These include payroll companies, private equity/hedge funds, and software as service (SAS) companies. These start-up business models are becoming more difficult to describe or categorize since they are bundling multiple business products and services; but you can be certain that these nontraditional competitors will, at least initially, feed from the lower risk, less complex accounts.
Another drawback to operating as a generalist is that it is nearly impossible to gain the necessary knowledge and insight into a particular industry, which is necessary to differentiate from competitors.
Although it is understandable that it is not feasible for all agents and agencies to specialize in niches, it is advisable to explore the option.
If your demographics allow for specialization, then it is probably the best way to insulate and protect yourself from dramatic disruptions in the marketplace.
As Abraham Lincoln said, “The best way to predict your future is to create it.”