The value of being a specialized broker
Is it better to be a specialist or a generalist?
This has been an ongoing debate in many sectors for many years. In one corner, there’s great value in holding in-depth expertise about a particular industry or sector and providing highly specialized advice and services to clients. In the other corner, generalists possess a broader scope of knowledge, and may be better positioned to advise clients on the big picture.
Certainly, there are advantages to each, and both specialists and generalists can serve important roles in organizations. For commercial brokers, however, the tide seems to be turning towards specialization.
In the 2022 Canadian Underwriter National Broker survey, sponsored by Sovereign Insurance, brokers expressed a high level of agreement on a statement about specialization: “Brokers need to become more specialized to withstand changing technology and sales models,” with 83% of respondents in agreement, albeit down slightly from 85% in 2021.
Those most in agreement are the industry’s next generation of leaders: 91% have been in the industry less than 16 years, compared to 77% in agreement who have 31+ plus years’ experience.
Why is it important not to wear too many hats? As the market becomes more sophisticated and risks become more complex, clients’ expectations are rising. They require their brokers to have a deeper understanding of their business and industry, to know their unique risks, and to deliver insurance solutions tailored to their needs.
To better serve clients, many brokers are responding to the demand for specialization. In the National Broker survey, respondents were asked: Over the past 24 months, how beneficial have these additional practices been for serving your clients well? Nearly two-thirds (64%) said developing specialty markets expertise has been beneficial, followed by developing deep knowledge of a small selection of products (60%).
The main advantages of specialization include:
Stronger client relationships: Since specialist brokers have deeper knowledge and insights about a particular industry, clients feel they are true partners. As such, brokers can build trust and foster stronger relationships with their clients. The National Broker survey points to brokers’ growing roles as trusted, knowledgeable advisors: They’re informing clients of emerging risks and exposures (72%) and relevant new products (70%).
Tailored solutions: Being immersed in a specialized field helps brokers better understand the unique needs to their clients’ businesses, and can therefore ensure their clients have comprehensive coverage tailored to their needs. Brokers can help fill any gaps that might otherwise be missed by someone who’s not immersed in a specific field.
Stronger carrier relationships: Many specialist brokers prefer working with carriers who are also specialized, as this allows them to collaborate on solutions. Sovereign Insurance, for example, focuses on four core industry segments: Construction, Manufacturing, Wholesale/Transportation/Logistics, and National Resources. When specialized partners come together, they build stronger relationships and can help deliver better outcomes for clients.
See: How carriers and brokers can enhance their partnership
New business: While traditionally brokers may not have adopted a niche approach to avoid leaving new business on the table, specialization can give brokers an edge today. Many find it’s a less competitive field, since they’re not competing for business with a large number of generalists. Specialized brokers are also finding new opportunities through referrals, cross-selling, and upselling.1
Certainly, by being specialists, brokers can tap into a sizable business opportunity. According to a report by Research Dive2, the global specialty insurance market is expected to grow rapidly over the next few years, reaching nearly US$244 billion by 2028, up from US$133 billion in 2020. The report notes the market is on the rise because of an increase in demand for specialized expertise and technology advancements. Specialty insurance is in great demand in the construction, environmental, healthcare, and energy industries. Errors and omissions (E&O) is another common type of specialty insurance.
Whatever the niche, brokers can unlock enormous value through specialization. While much of the market will still need a “one-stop shop,” commercial brokers who do “one thing well” will be well-positioned for the future and ready to meet the evolving needs of clients.
1 Insurance Thought Leadership, “Specialization: Agents’ Vast Growth Opportunity,” April 18, 2022
2 Research Dive, “Specialty Insurance Market Report,” Nov. 2021