State of Specialty Insurance Report
The world continues to change at a rapid pace. To respond to such change, businesses are forced to critically examine how they operate. To keep pace, nearly all business owners now require specialty lines coverage that goes beyond a standard insurance policy.
To understand the challenges and opportunities for agents when placing this business, The Hanover partnered with Zeldis Research and surveyed more than 300 agents to examine their approach to specialty lines. Our report confirms the unique advantages of forming strategic partnerships with a select number of carriers, while exposing the pitfalls of fragmentation when aligning and writing with multiple carriers.
of agents sell or place both specialty lines and standard lines products
Agency approach | Carrier partnership approach | Agency challenges
Partner checklist | Safeguarding against fragmentation
Approach to specialty lines
Over the last decade, industry experts have touted the benefits of independent agencies building industry- and product-focused specialization amid an increasingly competitive specialty distribution landscape and complex risk environment. Studies have validated the correlation between specialization and agency growth. Simply stated, independent agencies that specialize grow at a faster pace than those that do not.
Our research shows the majority of agencies do not report having separate divisions for specialty lines products, yet about half of the agencies report having specialized industry practice areas, especially construction and real estate.
Agents’ knowledge spans the full breadth of commercial lines
Agents have broad expertise and possess the capabilities to meet the wide spectrum of their clients’ needs, as the vast majority (96%) of agents sell or place both specialty lines and standard lines products.
According to Zeldis Research, it is not unusual for agents to consider themselves to be generalists, regardless of their focus, as they do a combination of standard and specialty lines.
Even among agents who report that specialty lines are 50% or more of their business, only 4 of 10 actually consider themselves specialty-focused.
Approach to carrier partnerships
Deciding which type of insurance company to partner with for specialty lines coverage comes down to deciding between direct versus wholesale and national versus niche.
Direct vs. wholesale
Agents choose to place specialty business directly with carriers about half of the time, selecting to leverage wholesalers, managing general agents (MGAs) or managing general underwriters (MGUs) the remainder of the time for market accessibility or expertise in a specific product, line or industry.
National vs. niche
Among agents who express a preference, 81% prefer national carriers to niche. "Gaining access to more states/national reach" and "more coverages are available" were the top stated reasons.
When determining which specific insurance carrier to partner with for specialty business, agents report expertise as the key factor in their decision making process.
While these findings lend themselves to a framework for strategic carrier selections, agents report they are more likely to consider carriers based on the line on which they are currently working.
A review of The Hanover’s agency data reinforced the idea that carrier selection is often made tactically. As a result, agents end up working with multiple carriers depending on the specialty line they are placing, resulting in widespread fragmentation in an agency’s portfolio.
Agents that prioritize strategic carrier selections benefit from the stability this brings to their overall book of business.
Unfortunately, when decisions are made and actions are taken on a line-by-line basis, agents can be left with a highly fragmented book. And many agencies underestimate the level of fragmentation that exists within their portfolios.
Analyzing agents’ books of business using The Hanover’s proprietary data, we found:
50% of commercial accounts have only a single policy with an agency, but have many more insurance policies elsewhere.
When commercial accounts do have more than one policy with an agency, 24% are split across multiple markets.
The typical mid-sized agency has at least 50 carrier relationships, and sometimes significantly more.
More than 60% of agencies’ premium is placed with their top five markets.
For agencies, this all results in extra work and missed opportunities to sell the full suite of coverages, which may invite competitors into the relationship. This also increases confusion and creates inefficiencies for the client, who now has policies with a variety of carriers.
“Today’s customer is looking for ease of doing business and streamlined service. When an agency partners with a carrier like The Hanover that has comprehensive, carefully designed product portfolio that respond to the wide variety of risks facing businesses, both are achievable.”
- Bryan J. Salvatore, EVP and President, Specialty
Specialty partner checklist
Agents who work with a select number of strategic carriers gain a distinct advantage in the specialty lines marketplace. As you seek to build strategic partnerships, look to align with carriers that have the following characteristics.
|Carrier characteristics||Agent benefits||The Hanover|
|Offers a broad suite of specialized products||Carriers that offer a range of tailored coverage for simple to complex exposures on an admitted and non-admitted basis enable you to meet coverage needs for a wide variety of clients.|
|Invests in digital capabilities||Quote-and-issue platforms that enable access to stand-alone specialty lines policies allow agents to seamlessly offer specialized coverage for small business customers.|
|Coordinates coverage||Carriers that work internally to offer connected standard and specialty lines coverage make it easier for you to service accounts, ensure your clients benefit from account-focused solutions and maximize your relationship.|
|Offers direct access to underwriters||Underwriters with deep product- and industry-specific expertise can work with you to solve for complicated and complex accounts. This enables you to craft tailored insurance solutions for each customer.|
|Provides specialty lines customer service center support||Commercial lines service centers that serve both standard and specialty lines can help agencies improve their economics and save valuable staff time.|
|Enhances the customer experience||Online, web- and mobile-based self-service tools for paying a bill, managing policies and reporting a claim keep today’s modern customer engaged, and agencies efficient.|
While other carriers may have one or more of these characteristics, The Hanover's total offering enables your agency to fully realize the benefits of a strategic partnership with a carrier that takes a differentiated approach to specialty lines.
Safeguarding against fragmentation
Top agencies look for carriers that have both the knowledge and the product offerings to deliver insurance programs that offer a full suite of coverages for their customers’ businesses. This cohesive approach helps address a business’s total risk portfolio, rather than its individual parts. Niche carriers that offer a few capabilities can still play an important role, but, agencies that specialize across multiple products and industries may not find as much value in these carrier relationships.
Agents who are adept in this space are building broad specialization and partnering with carriers that have designed product portfolios that respond to the wide variety of risks facing businesses. Strategic carrier partnerships can empower agents to be more efficient and maximize protection for their customers.
About this report
The Hanover, in conjunction with Zeldis Research Associates, conducted a two-phase study with more than 300 agents who work with clients, obtain quotes, and make placement decisions for key specialty lines. The Hanover was not identified as a participant or sponsor of the study.
About The Hanover
The Hanover is a leading property and casualty insurance company offering a broad portfolio of tailored coverage solutions for personal, commercial and specialty customers. The Hanover is a Fortune 1000® company, with nationally recognized claims service and proactive risk management expertise. The company's financial strength has earned it high marks from key industry analysts, including an "A" rating (Excellent) by A.M. Best Company.
About Zeldis Research Associates
Since 1991, Zeldis has been designing customized market research to help the financial services industry understand their customers and marketplace. Zeldis uses a variety of methods to get the precise results needed, including qualitative, quantitative, and advanced analytic approaches. Zeldis brings richness in ideas and quality in results to every engagement—as Zeldis has done for more than three decades.
Emily P. Trevallion