Making the Move From Generalist to Specialist
The old days of one person being able to deal with all of a customer’s insurance needs have gone by the wayside.
- Lori Chordas
- November 2022
As brokers, managing general agents and others look to grow their businesses, many are finding a niche in transitioning from being a generalist to a specialist, insurance industry experts say. They're doing this to increase efficiency, credibility, retention and revenue.
Geof McKernan, chief executive officer, NSM Insurance Group; Troy Korsgaden, founder and principal, Korsgaden International and author of the book Specialization: The Master Key to Agency Transformation; and Richard Augustyn, founder and chief executive officer, NIP Group, took part in an AM Best panel discussion entitled “Making the Move From Generalist to Specialist.” Following is an edited transcript of their conversation.
There's been a lot of talk about specialization over the years. What are the benefits? Why is it so important for brokers, agents and others to transition from taking a one-size-fits-all approach to becoming a specialist?
Augustyn: Specialization allows agents, brokers and MGAs to set themselves apart from their competitors, far beyond the table stakes. Whether the specialization is at the line of business level, at the industry level, or even at a region, it gives them a unique competitive advantage—what you might want to call a sustainable right to win. That's very important when you only earn a commission if you're successful. A broker recommends you or a customer selects you.
“As we think about insurance, you’ve got to have people to the earlier conversation that are experts. People expect expertise. The specialist can gain that expertise and you can scale it, because you don’t have to do it all at one time. You can do it one line at a time, one risk at a time.”
Why do you feel that specialization is important? Would you say the generalist structure perhaps no longer suits today's insurance marketplace?
McKernan: If you build something today, if you build a house, your HVAC guy is not going to do your electrical. Your concrete guy is not going to do your plumbing. People want specialists today. In the market today, consumers want a specialist. Whether you're selling automobile insurance, they want to speak to somebody that's a specialist in that area.
We have a pet insurance business and our customers are talking to people who know pets from the DNA all the way down. What the consumer wants, as well as what the agent wants, is to speak to somebody who consistently writes and understands these accounts.
What do brokers and MGAs need to do to identify a niche and move toward specialization? How do they find their specialty or the risk they want to focus on?
Korsgaden: That CPA, doctor, or lawyer, whoever you're dealing with, the professional has expertise partners, because they can't be all things. They can't know all things, but they are the gateway to all things, in terms of financial services. As we think about insurance, you've got to have people to the earlier conversation that are experts. People expect expertise. The specialist can gain that expertise and you can scale it, because you don't have to do it all at one time. You can do it one line at a time, one risk at a time.
While creating those programs, how challenging has it been to find talent specialized in your niche areas?
Augustyn: It's extremely difficult to find talent. Our industry's at full employment. Many of our most experienced team members are reaching retirement age. It's not a problem specifically to us. It's an industrywide problem. It gets harder to solve when you're niche-focused. We're running a current search today. Our national talent pool is less than 10 people. That is very different than if you're more of a generalist. You have to figure out ways to solve those problems. It becomes a full company commitment. It's talent acquisition.
McKernan: What we've done over the years, the last 15 years—we've had a very robust intern program. That has done us very well. We've put students into risk management, finance, marketing and all different parts of our business. Our retention on those interns has been very hot. We give them the experiences. We give them a career path where they can excel. That point has been very beneficial to us.
Korsgaden: Insurance is a lot more sexy than it was when I got into it. I got in in 1983 and I like to kid—my company that I started with gave me a big old book of business called the phone book. But I bought the vision. A lot of us go out today in the industry and try to hire people and we don't sell them on what a great industry this is.
After you make the transition from generalist to specialist and you find your niche, how do you know it's working and how do you measure success?
McKernan: The measure of success is, No. 1, are you providing profitable premium to your carrier? Why is that important? If you don't provide profitable premium to your carrier, you're not going to be in business. The carriers are partners. Those who provide the capacity are partners.
Then, on top of that, what are we looking at? Is the distribution diverse? The number of units. A lot of people just count premium but you must have a number of units growing. How are you growing your business? Are you going to diversify? Are you growing by the number of units, the number of accounts you're riding on?
How does changing one's organizational structure to become a specialist help strengthen and build customer relations, while also achieving economies of scale and sales growth?
Korsgaden: The real arms race in the industry today is to be the gateway to all things insurance and financial services. You lead with your expertise. The people say, “This is my firm. I want to have everything in one place if possible. I'm going to them before I go anywhere else. They're the first thing I think about for service and advice.”
Risks are always changing. Is focusing on niche areas challenging in the face of an ever-growing and ever-changing risk landscape? Are there opportunities to come from that?
Augustyn: It's challenging because risks are being driven by technology changing. Technology is reshaping whole industries that we insure. That creates new and emerging risks. It creates new opportunities to gain expertise in. Those risks have to be managed, priced and transferred. Ultimately, it creates opportunities for those that are willing to spend the time and effort to specialize and become an expert in a particular niche area.
McKernan: If you go back—think about 20 years ago when we all talked about employment practices liability, EPL, for example. When we all were all about the same age and we thought—what is this?
Now it's commonplace. Let's fast-forward. You had to get expertise into that. You had to understand, what is that? Employment discrimination, sexual harassment, all those things. You fast-forward and what are you insuring? The biggest coverage today is—you better be offering your clients cybersecurity.
Korsgaden: I experienced the cyber myself. I'm a consultant to insurance carriers. They all have a clause in the contract about cyber. They've got a real risk. It's not a risk for the policyholders, but for the representatives to represent them and so on and so forth.
NSM Insurance Group
What are the challenges or hurdles in becoming a specialist? What words of advice do you have for brokers and others who may be resistant to making that change?
Korsgaden: If you think about the expertise partners that you're going to have, it's hard to convince somebody not to go back to the generalist system. Everybody wants to put on more people, but they want somebody to answer the phone when it's ringing. They want somebody to get back to somebody.
What have you found to be some of the biggest lessons learned when becoming a specialist, and what are some mistakes that one should avoid when making that transition?
McKernan: One of the biggest things is, good leaders make good programs. They develop good programs. Finding that person who understands the whole valuation of a program, do they understand the underwriting? Do they understand the distribution? Can they go out and hire people who are the next level? That's very, very important.
The mistakes we've learned is, hey, going into industries that will never produce an underwriting profit. One of our first programs, it was a great program for us, but the carrier had a hard time making money. That was very hard. We ended up giving the pen back after 10 years.
Augustyn: We're in a market-based business and for whatever structural reason, there's too many carriers who want to chase a particular market segment or too many brokers who want to chase a particular type of client.
That probably is not going to make a good area to specialize in for the long term, whether you're on the distribution side or you're trying to underwrite for a profit for a risk-bearing partner. Looking at it, you must thoroughly due diligence these factors and ask yourself, are the market dynamics right? Is the market large enough that you can create a good revenue opportunity for your firm, but not so large where it's attractive to a lot of big players?