Independent Agents: Become an Insurance Specialist or an Insurance Generalist?

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  • One of the questions independent agents often struggle with is whether they should focus on certain lines of business insurance or stick to being generalists. 

    In some communities, you’ll find insurance agents who specialize in business insurance for construction companies or for fishing companies, for example. They tailor their coverage to the unique needs of business owners in their area and customize their offerings accordingly. 

    So how can an agent know whether specializing like that is a good positioning move or not?

     

    The Growing Trend Toward Specialization

    Before we dive in, it’s important to note that most independent agents today are making the shift toward being specialists and niching down.

    “In today’s insurance industry, there’s not much space for the utility player,” explains the team at online insurance resource Precise Leads. “As markets and access to insurance become broader with new legislation and technology, customers are expecting more specific expertise when purchasing policies from agents, driving a trend toward specialization.”

    We live in a time where customers research policies on large provider’s websites and can purchase basic coverage with ease. This is something today’s agents must keep in mind when choosing their game plan.

    Historically, independent agents have tried to be “one stop shops,” says insurance consultant Frank Pennachio. But in today’s crowded market with its rapidly advancing technology, generalists run the risk of losing business and even being cut out of the picture entirely. 

    Morgan Ball at Sahouri Insurance makes the point that niche markets aren’t frequently targeted by major companies. Being a specialist puts an independent agent in a position to address the specific needs of a niche market and be a business owner’s go-to person for insurance coverage. 

    With that said, here are some factors that will impact your decision to be a generalist or specialist, and how to figure which strategy is right for you.

     
    farmer on a tractor, tilling a verdant field, representing the customer of an insurance specialist
     

    Geography

    Geography definitely plays a big role. If you operate in an agrarian community where farmers make up a significant portion of your customer base, it would make sense to focus on farm insurance, ranch insurance or agribusiness insurance. 

    Texas, Missouri and Iowa, for instance, have the largest number of farms in the U.S., writes Mark Owuor Otieno at World Atlas. So agents located in one of these states might wish to consider specializing in this area.

    Specifics covered by farm insurance include farm machinery and equipment, livestock, animal feed and fertilizers, explains insurance information source ValuePenguin. With an intimate knowledge of these types of properties and the needs of farmers and their families, you would be able to offer your customers targeted and comprehensive coverage. 

    If, on the other hand, you live in a popular tourist destination where there’s a large number of hotels and restaurants, you can focus on hospitality insurance. This type of policy covers businesses from issues like liquor liability, slips and falls, injured patrons and food poisoning, explains insurance and risk management advisor Amy Vitarelli

    There are a lot of variables that dictate what type of policy local businesses need, according to small business insurance online marketplace Insureon. That’s why it’s important for business owners to have input and guidance from a qualified independent agent who knows their industry as well as their geographical area inside and out. 

    So if you are based in an area where a large number of local businesses are part of a particular industry, it would probably be smart to specialize in that industry.

     

    Local Population

    Population is another major factor. If you’re living in a rural area with a low population, it may be necessary to be a generalist due to the simple fact that there are limited niche business opportunities, says Pennachio. In this situation, there may not be enough companies to go around to justify zeroing in on one industry.

    Kevin Stipe, president of Reagan Consulting, is a firm believer in specializing in a niche, and even goes so far as to say it’s “do-or-die in the current marketplace.” Still, he admits that in small towns or rural areas, generalist agents can often flourish because of the lack of competition. If you’re the only agent in town, you have the luxury of monopolizing your area, and a steady stream of clients should come your way. 

    If, however, you’re operating in a highly populated area, differentiation is crucial, he adds. When business owners can choose from dozens of different agents on top of the selection of policies they can find online, being a generalist won’t usually cut it. If you’re located in a major market like New York, LA or Chicago, specializing in business insurance is really your only option. 

    This brings us to our next point. 

     

    Local Competition

    The level of competition in your area will also impact your decision-making. Nearly 3 million people worked in the insurance industry in 2018, according to the Insurance Information Institute. This means many independent agents are up against some stiff competition, even if they’re outside of major markets. 

    Regardless of the population, having a large number of other insurance agencies close by makes it more difficult to thrive as a generalist. If you have no discernible skill set and don’t bring anything unique to the table, what reason does an insurance customer have to choose you over another agent down the block?

    There isn’t one. So if someone googles “business insurance agent near me” and gets a long list of agents, being one of the only specialists in certain lines would be the logical move. As Bill Schoeffler and William Schoeffler Jr., financial analysts for Oak & Associates put it, independent agents can essentially make the competition irrelevant by differentiation. 

    Niching down allows you to clearly define your target demographic, establish a loyal customer base, build meaningful relationships and stand out in your industry, agrees marketing and public relations professional Sonja Dyess

    Still, if you’re only one of a few agencies that offers business insurance, being a generalist may be a viable option. Either way, it’s a good idea to perform competitive analysis to identify your true competition, says marketer Christine White. To do so, you’ll want to look at their market share, how they differentiate themselves and whether they’re making volume or individual sales.

     
    small business owner, a florist, at a desk covered in flowers; representing the customer of an insurance specialist
     

    When it Makes Sense to Remain a Generalist 

    Up until this point, the research largely suggests that being a business insurance specialist is the wiser move. But there are certainly benefits of being a generalist. 

    “Operating as a generalist has strong appeal,” notes Pennachio. “Generalists are not restricted to certain industries or lines of business and are available to all opportunities in the marketplace.” Going this route means you don’t pigeonhole yourself into only offering a couple of types of coverage and can accommodate the needs of business owners across numerous industries. 

    The team at American Strategic Insurance says generalist insurance agents are often better prepared to deal with market changes because they’re not limited to only a few verticals. That way they can reinvent their business model and continually attract new clients as the insurance industry inevitably keeps changing. 

     

    How to Know What’s Right for You

    Ask most experts, and they’ll tell you that today it makes more sense to be a business insurance specialist rather than a generalist. Ohio-based agency, DeVenne Insurance, says that although generalists offer a wider range of services, specialists tend to deliver higher quality services. 

    And with evolving technology and increasing competition in the insurance industry, attempting to be a jack-of-all-trades will only become more difficult. This isn’t to say that you can’t make it as a generalist, it just means it’s going to be an uphill battle for most agents. 

    The main exception would be if you operate out of a small market with minimal competition. In that case, remaining a generalist may still be viable, at least for the time being. However, if you decide to go this route, it’s important to keep your finger on the pulse of what’s happening in your area. You’ll want to stay on top of your customers’ needs and know which strategies your primary competitors are utilizing. 

     

    The Bottom Line 

    Business insurance has changed a lot over the years. It used to be that customers would seek coverage offline from a generalist in their area who had their hand in everything. 

    Today most people look for coverage from a specialist with an in-depth understanding of their specific industry and needs. And considering that most business owners can quickly obtain basic coverage online, the demand for generalists has waned in most markets. 

    So unless you’re one of the only agents in town, specializing in certain lines of business insurance is generally your best bet.

     
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