Niche specialization, nuanced networking and finding a
There’s no black art to developing new business opportunities for commercial accounts, say a number of brokers across the country. Even in a struggling economy and during an unusually sustained soft market, the disciplined sales strategies that have proved to be extremely successful for some of Canada’s most notable independent firms remain the same. These include: building specialized practices around tightly focused industrial niches; leveraging industry involvement and existing customers to generate referrals and introductions rather than relying on cold calling; and developing client relationships based on expertise and service rather than price.
Niche specialization was a key part of how Marshall Sadd grew the Edmonton-based firm of Lloyd Sadd. When Sadd and his partner Kevin Boyd bought the brokerage from Sadd’s father in 1999, it was a “typical regional firm” with 22 employees writing approximately $25 million in premiums with a split of 60% personal lines and 40% commercial lines.
“Today we’re 95 people, $100 million in gross written premium, 90% commercial lines, with some VIP personal,” he says. With the exception of the strategic acquisition of a surety company that helped the firm build its niche in construction, the 18% average compounded annual growth has been entirely organic.
To achieve this growth, Sadd decided to move away from a generalist model and develop specialized practices in the areas of construction, public entities and manufacturing with specialized silos in each. Building a practice for a given industrial niche requires gaining an understanding of that sector as a whole and the business issues facing members of that industry, he explains.
“You’re not just delivering insurance contracts or selling premiums. You’re actually learning their business to help them identify and mitigate risk through the external resources that you can bring. Our strategy is to get to a place where we would be thought of by our clients as the outsourced risk manager.”
Once a niche has been identified, the next step is ensuring the firm has the appropriate specialists that understand the business and risk management issues facing that sector. “If I don’t have those individuals I try to find them before chasing the industry,” says Jacques Dufresne, executive vice-president for Eastern Canada at BFL Canada in Montreal. “There has to be a universe. There has to be enough of it that you want to make an investment in it.” In addition to its practice areas in construction, real estate and municipalities, to name a few, BFL has targeted universes in film, sports, equine and trucking.
All the brokers interviewed for this article say that building a successful specialized practice requires creating a differentiator and developing a value proposition that demonstrates an intimate understanding of not only the key risks for a given sector but the main business challenges beyond risk. That process almost always involves going beyond a simple insurance transaction.
For example, in the trucking industry, accident prevention is extremely important, notes BFL’s Dufresne. “When you buy insurance, that’s sort of the last resort,” he explains. “You’re basically taking your risk and selling it to an insurance company. If you can prevent risk from happening, you’ll reduce your cost of risk. Our differentiator is to work with clients to reduce their cost of risk.” To accomplish this, BFL retains the services of engineers that will perform an analysis of a trucking company’s internal safety measures with the goal of reducing the frequency and severity of claims. “After you’ve done hundreds of those analyses, you can compare people to their peers and help them progress and become a safer place to work for the truckers,” says Dufresne.
In some cases, however, a brokerage’s differentiator can be based almost entirely on how well it understands the coverages required in a particular industrial niche and the ability to obtain them. When StÃ©phane Massie left Marsh in 1991 to join Montreal-based VÃ©zina assurances inc., he convinced brothers Pierre and Patrice VÃ©zina that there was good money to be made insuring sprinkler contractors if they could develop a unique product for them.
“We knew the key coverages or issues for this business at that time were professional liability and failure of the system to perform,” says Massie, noting that many of the contractors had an exclusion for failure of the system to perform in their existing policies. “We approached Lombard Canada and came up with a special wording that they approved and went out and called these contractors.” President and CEO Pierre VÃ©zina estimates that there are approximately 30 sprinkler contractors in the province of Quebec and his firm now insures 26 of them.
“In ’92 we wrote the contract for the biggest sprinkler contractor in Canada aside from Grinnell: Viking Fire Protection, which is represented all across Canada,” recalls VÃ©zina. “When you go and see a prospect and say ‘We are the broker for Viking Fire Protection,’ that helps a lot.”
VÃ©zina and Massie developed a list of sprinkler contractor prospects by consulting various industrial directories. But Massie says that what really opened the door for VÃ©zina assurances in the segment was getting involved with the industry association, volunteering at the annual golf tournament and becoming a sponsor.
“After that, I was invited to be the representative of the service suppliers on the board. I’ve been doing this for more than 10 years. After a while it becomes more friendship than anything else.” He strengthened VÃ©zina’s connection to the sector further by inviting the insurer to also be a service supplier member of the association and come out to the golf tournaments with him to meet his clients in person.
Just joining an industry association as a passive member is not enough, says Andrew Kemp, president of CMW Insurance Services Ltd. in Vancouver. Brokers should not only be involved but “you need to be active, be there and know what their issues are and take a role in that association,” he emphasizes.
More importantly, “when you go to these association meetings you get to talk to all these individuals and you never talk about insurance,” says Chris Huebner, partner at Lloyd Sadd. “You always talk about business risk and business issues and how it is in their industry. You start to be able to ask a lot better questions with respect to the industry itself as opposed to talking about just insurance.”
Our strategy is to get to a place where we would be thought of by our clients as the outsourced risk manager.
Lloyd Sadd has taken a uniquely proactive approach to industry involvement in its construction practice by hosting an annual one-day educational construction conference. Marshall Sadd says the event attracts a mix of clients and prospects and is an opportunity for the brokerage to showcase its expertise in sessions on topics such as understanding builder’s risk policies and how to assemble a submission for an underwriter.
In addition to helping brokers learn and understand what the business concerns are for the niches they’re targeting, getting involved and taking an active role in industry associations is evidence of a commitment to the sector, says VÃ©zina. “A lot of the time they test you. They want to see if you’re a fly-by-night; you’re in one year but in a year or two you’re not there for the long run.”
Meet and Greet
Beyond the purpose of gaining an understanding of the important issues in an industry segment, joining associations and going to functions for the industry a broker is targeting provides opportunities for introductions and referrals from existing clients.
CMW’s Kemp says that he relies on his existing clients to provide him with background information on prospects he is considering approaching in the real estate and construction businesses to determine what are the most worthwhile opportunities.
“I have industry advisors, a network of people involved in selling to that same industry. We can both help each other, sort of advocate for each other when we see opportunities. We have a cup of coffee every six months and talk about what’s going on in our business and what’s going on in their business. And we’re able to compare who’s growing and who’s not and look for opportunities for each other, and make introductions.”
I have industry advisors, a network of people involved in selling to that same industry. We can both help each other, sort of advocate for each other when we see opportunities.
VÃ©zina assurances employs a similar approach when looking for prospects in the pharma and healthcare field. “We attend seminars and big conferences that the pharma industry holds every year in the province,” says Pierre VÃ©zina. “A lot of our clients are there, but at the same time, their friends in the industry–which are probably our best prospects–are also there. It’s being introduced at first, but after that it’s our work” to develop the prospect.
In fact, VÃ©zina and Massie take an extremely proactive approach to obtaining introductions. “We’re now telling our producers that when they sell a new piece of business to write down in the service timeline that when they come back to the client with the policies and explanations and pre-renewal next year, they’re going to ask them for introductions, and it’s written before they sell the account,” says Massie. “You refer your dentist but you introduce a friend,” expands VÃ©zina. “A reference is good, but definitely an introduction is better. I would say that 99% of the people are very happy to help you.”
Obtaining introductions to new prospects through existing clients and relationships is a technique called the Red Hot Introduction. It is an essential part of The Wedge sales philosophy developed by Texas-based strategic coach Randy Schwantz, a guru to the insurance industry since the publication of his first book on The Wedge in 1996. Both Sadd and Massie say The Wedge heavily informs their approach to initial conversations with clients once they have gained the all-important introduction.
Sadd describes The Wedge as “a very tactical way to qualify a prospect. It determines if there’s a real opportunity by getting them to identify that they’re not getting the types of services they should be getting from their incumbent broker and getting them ready to fire them.” Issues that may serve as a wedge include not being able to get documentation in a timely manner or help with a claims issue, adds Huebner.
“For example, a lot of people say I had this claim and I didn’t get any assistance from my broker, I felt I was abandoned. Those would be some things where we have some resources that could fit that type of scenario. Most people want a level of service that a lot of the time they don’t get,” Huebner says.
“You have to find a pain in the current handling of the insurance portfolio and work on it and prepare solutions to these pains,” says Massie.
The key is to form a relationship built on service and getting the client to think about the broker as a strategic partner to help manage the company’s risk, says Sadd.
“If they’re into this bid and quoting language, we’ll walk away. It’s really about what is your current broker doing for you, what would you like your broker to do for you and here’s what we can do for you,” he says.
VÃ©zina agrees. “If we get in on price, we’re going to lose it on price.”
Copyright 2010 Rogers Publishing Ltd. This article first appeared in the October 2010 edition of Canadian Insurance Top Broker magazine.