Smaller brokerages looking to specialize without engaging in a merger and acquisitions growth strategy may find opportunities exist right inside their own backyards.
“I think you can leverage the resources within your insurance partners and carriers. And you can look at experts from outside the industry with whom you can consult,” Eric Osborne, chief growth officer for the national brokerage Navacord, said during Canadian Underwriter’s webinar Tuesday called, What’s so special about specialization?
“I know we’ve talked a lot about product specialization and industry segment specialization, but there’s also tremendous examples of being a specialist in your community.
“Just by establishing deep ties, being involved in the community, being seen in your local geography as someone who is a risk advisor — I know that might sound like a more general approach, and maybe it’s more of a fit with businesses that are more mid-market in those communities. But there’s a [growth] strategy there as well.”
Osborne was responding to a question about the opportunities for specialization available to smaller brokerages that don’t rely heavily on M&A for growth.
Earlier this year, Canadian Underwriter’s 2024 National Broker Survey canvassed the opinions of more than 200 brokers across the country. It found the general level of support for specialization as a growth strategy was 86%, roughly the consistent high level seen over the past five years.
But as the brokerages in the survey got smaller, support for specialization diminished. Only 76% of brokers at smaller firms (fewer than 20 employees) agreed either ‘greatly’ or ‘somewhat’ with the statement: “Brokers need to become more specialized to withstand changing technology and sales models.”
Conversely, 89% of those surveyed in mid-sized brokerages (21-100 employees) agreed with the statement. And 92% supported specialization in larger brokerages (more than 100 employees).
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Certainly, being able to merge with or acquire other brokerages is a quick way to gain size and expertise to specialize in a certain area. M&A growth provides scale, which provides greater resources — a.k.a. ‘bench strength’ — and value to clients in areas of specialization, said webinar panelist Russ Quilley, executive vice president, chief of broking, and head of commercial risk at Aon Canada.
But in choosing an area for specialization, the brokerage’s size may not necessarily be the determining factor, he added. As long as they are meeting a specific need within their local community.
“Depending on the scale of your organization, you need to determine what matches [with the brokerage’s resources], figure out what the marketplace you’re targeting represents, and then what those clients are looking for,” he said. “And what are those services that industry is demanding?
“That really should set the tone regarding what your bench strength looks like. And to me, a major organization is of course going to have a broader level of team members that it can bring. So, you need to just understand what the scale is for your organization, and set a strategy around it.”
Osborne suggested that offering the services of local third-party experts can also set apart brokerages that have strong ties in their communities.
“You need to try and build both internal resources [within the brokerage] and third-party [experts],” he said. “An example we would use is in long-haul trucking. A lot of times, certain fleets need risk control experts, loss prevention experts, and it’s important sometimes for them to be more local.
“Engaging with a local third-party can help with [CVOR – commercial vehicle operator’s registration] improvement, fleet safety, driver training and those types of things. You might have to find a third party there.
“For us, it’s about vetting them, understanding their services and solutions, and making sure you’re comfortable engaging with them as an extension of your services to the client.”
Feature image courtesy of iStock.com/photovs
