The digital economy is rewriting the rules of data-driven industries like insurance, but not all players face the same pressures. For specialty insurers, the face of change is often the direct target of their business: widespread economic shifts, like the rise of gig workers, create niche market needs specialty insurers are well-positioned to meet. Yet the same force behind those shifts, and the technological innovation that comes with it, threaten to leave specialty insurers behind. And it’s not hard to see why—at a time when consumer-centric ecosystems and AI-powered processing are becoming standard, excel spreadsheet-based raters are still widely used across some specialty lines. For the modern specialty insurer, the challenge is to innovate, especially in rate-quote-bind-issue processing, while adapting to new relationships with consumers, distributors, and key partners. And to do it fast.
To meet these challenges, specialty insurers are investing in their agility. They are streamlining their rating engines and extending core functionality to brokers and agents. More broadly, based on our industry experience and work with specialty insurers, specialty leaders have focused on three key areas to drive growth: segment strength, distribution strength, and digital strength.
In this blog, the first in a three-part series on driving growth in the specialty sector, we’ll examine how insurers are strengthening the value of their customer segments. This refers to the niches an insurer specializes in—how well they understand their segments determines the quality and profitability of their products, their opportunities to identify new products for unmet needs and fulfill adjacent services, and the trust they can build with their customers.
Building segment strength: 3 ways to drive growth with segment specialization
Here are the three major ways we’ve seen specialty insurers capitalize on segment strength and use that strength to grow their business:
1. Building segments into community
Specialty insurers will often serve several unrelated niches, but many have a prime area of focus—for example, a high-growth or high-net worth segment they have the data and experience to fully address. This intimate understanding of a segment allows specialty insurers to create products that will meet the specific needs of the customers as well as provide the customers with high value services that will attract, engage, and retain them.
Take a carrier that insures golf courses, for instance. They may promote themselves as a leader in the industry by delivering tailored content in various formats such as conferences, websites, or a newsletter that brings together business leaders. They can also leverage their specific knowledge to advise clients on mitigating risk. Especially in undeveloped niches like ride-sharing, educating prospective buyers with contextual content on loss scenarios and segment-specific risks is an essential part of building demand.
The niche data specialty carriers use to insure the specific needs of their clients also provides the opportunity to engage them in a richer relationship of mutual benefit than conventional insurers—making the most of that potential is key to building strong competitive specialty insurance today.
2. Creating segment-specific offerings
Specialty insurers drive growth from their segments by translating their knowledge of their clients’ needs into tailored coverages that tackle risk scenarios and peculiarities unique to their targeted segments.
For example, they could package tailored programs for their segments by mixing and matching elements from multiple insurance lines of business. Or, they could design segment specific terms and conditions, i.e. forms and wording, and offer those as extensions to standard wording to provide enhanced and tailored coverages to their segments.
Segment offerings may not even involve indemnity offerings–for example, insurers sometimes offer loss control services and other business services like risk management. In some situations, the insurer may go beyond insurance – for example one of our insurer customers serving the sharing economy segment also provides loans to their small business/self-employed contractor customers.
These opportunities are unique to every niche, but specialty carriers are the best suited to identify and quickly act on them, generating value from their segments while improving customer satisfaction.
3. Forming value-added partnerships targeted for that segment
Segment-focused specialty insurers may not have the requisite scale to handle certain areas, and therefore will forge partnerships with third-party suppliers of coverages and services for these areas. This saves specialty insurers the expense and time it would take to build these offerings from scratch, taking advantage of dedicated partners ready to provide them at scale—especially common for coverages like Cyber and Workers Compensation. In claims and service, insurers commonly bring in adjacent providers for such services as Emergency Response and Equipment Repair and Maintenance.
Insurers forging these partnerships are able to maintain centrality as the single touchpoint for their clients, increasing ease of use and solidifying the relationship of trust with customers. This drives growth by expanding the responsibilities the insurer handles for their segment.
These three methods are leveraged by segment leaders making the most of their unique position in the market. Each builds on and feeds the others—the more an insurer expands their presence in an industry, the more opportunities they have to further understand their customers’ needs, and when they understand their customers better, they generate more trust as a reliable provider on related needs. Segment strength isn’t just an attribute specialty insurers should improve: segments are the strength of specialty insurers. Recognizing that has allowed segment leaders to drive growth, despite the disruption brought on by digital.
In the next blog in the series, we’ll discuss the key elements of specialty carriers that lead in distribution strength. Ready to step it up in the Specialty market? See how BizDynamics On-Demand Services Group can help make your possibilities real.