Stand out from the crowd

Every business needs a point of difference, something that sets it apart from the competition, something that gives a customer a reason to choose it instead of a competitor.

More than any other industry, insurance providers need to be able to differentiate themselves because they are selling an intangible product. Many customers simply cannot tell the difference between the products and services offered by different brokers and insurers. When it comes to making a claim, of course, the differences comes to light all to quickly but, until then, there may be little to distinguish between products and then, of course, it may be too late.

That is, unless we are talking about niche commercial insurance. For brokers and insurers, niche insurance presents a real opportunity to give customers something different from the competition. Brokers can show customers that insurance products and services are not all the same. If you come to someone who really understands what you do, and where you do it, you will get an insurance service with a similar level of sophistication.

If you think niche commercial insurance is just a small specialist area, then you would be wrong. For example, there are thousands of farms and schools in the UK, all protected by niche insurers. At the other end of the scale, niche insurance also protects everything from doctor's surgeries to classic cars.

Put simply, niche commercial insurance is a way of slicing and dicing the market up into identifiable segments that each have specific needs. 'Niches' share characteristics and benefits with brokers and insurers who both deal with other businesses like theirs and understand from the word go what insurance requirements they have.

Besides, as soon as you step away from the personal and commercial high-volume worlds, insurance simply has to become niche. Commercial packages have their place but, for many businesses, they are simply not tailored enough.

So, exactly what opportunity does niche commercial insurance present for brokers and insurers? Most obviously, it is a chance to stand out in the market. Small and mid-sized brokers and insurers cannot always compete on price alone, particularly as rates soften and competition hardens. They need to be able to offer more than just a standard insurance policy because customers can get that anywhere and, most likely, at a cheaper price, too. It is an opportunity to add value and show that price is not everything.

Broker cynicism

Understanding a niche is also a good opportunity to overcome the cynicism that is still prevalent in the insurance industry. A broker of any size who truly understands a customer's business - and who is able to pick out specific risks the customer had not even considered - is in a strong position to win their confidence, their business and their long-term support. A niche specialism can also help create an opportunity for brokers to make insurance more meaningful. A dedicated care-home broker is selling a unique protection package to a business they know intimately. Their interests are bound up with that of the customer.

Rather than deciding you want every bit of commercial business in your city, region or the entire country, niche insurance is about targeting every charity, every nursery or every care home in your local area. With the right insurer, and a tailored policy behind you, you are in a strong position to win the business and are also more likely to keep it for longer, too. Indiscriminately taking on any old commercial property will not give you the opportunity to really add value. If you win the business on price, you should not be surprised if you lose it on price.

With a niche specialism comes the opportunity to take a more strategic approach to your business. You will be in a good position to provide unique feedback to insurers who cannot be in touch with the market at ground level all of the time. Brokers can identify when particular commercial property or liability risks are changing and, therefore, they also instinctively know when insurers need to adjust their attitudes, refine their products or make strong business pushes.

It is all very well making a concerted effort to become a niche broker or insurer, after all, everybody wants to be an expert in something, but what really makes a broker specialist? What unique skills and understanding do they need to possess?

Above all, knowledge is king. You need to understand your niche, or niches, intimately. Most importantly, you need to understand them better than anyone else does, and have access to support when you need it.

This means a knowledge of more than just insurance. For nurseries, for example, you need to understand how they are run and what challenges they face as a business. It is important to remember that the insurance industry is not alone in struggling to get to grips with regulation. This understanding will naturally translate into a better idea of the risks they run and their specific insurance requirements, but you need to start with a deep understanding of the business in the first place.

Of course, you also need to be able to offer a product that specifically matches those needs. This is where you need to be confident you have an experienced insurer behind you. Its understanding of the market needs to be as in-depth as yours. You are placing every faith in the insurer, so you need to be confident they can support your niche business with its specific requirements.

Specific benefits

An intimate knowledge of the product you are offering is also necessary. You need to be able to draw out the specific benefits relevant to your customer and its business. Small details can give added reassurance. For example, when dealing with a school, does the policy provide comprehensive business-interruption cover? Does the insurer fully understand and provide guidance on child protection? What is the basis of cover for potential abuse claims - is the cover there at all?

Every detail you can highlight to illustrate that you, and your insurer, have every part of its business covered, strengthens your cause and, in the long run, this will stand you in good stead. Other brokers will not have the depth of knowledge you possess or have access to specialist insurers.

Of course, your niche specialism - and the strength of your relationship with the insurer backing the business - is really tested when your customer faces a claim. If it is truly niche insurance, then it is not a standard policy and it will not be a standard claim. For example, if it is a care risk then the insurer may need to arrange for patients or students to be moved quickly to alternative accommodation. If the claim is for property damage to a listed school building, the insurer should understand the process for restoration and be able to manage repairs with local councils and planners, English Heritage and other interested bodies.

Ultimately, however dedicated you are to your customers, if your insurer lets you down when a claim eventually occurs, then this will inevitably reflect upon you and your reputation will be tarnished with this customer and others like them. While becoming a niche specialist strengthens your position in a particular market, if your service or expertise falters, then this can have a knock-on effect.

This begs the question - what are the risks of focusing your business on a niche specialism?

From one perspective, it might appear that you are putting all your eggs in one basket. When the market generally becomes more profitable, it is easy for the bigger insurers, and consolidator brokers, to sweep into niche markets. They can undercut smaller brokers dramatically, wiping out their books in no time. So, a mix of business - niche alongside other broader business - will always put you in the strongest position.

Where niche insurance is concerned, a genuine knowledge, and a sound understanding, will always ring true. If the insurance service you have been offering is good value - not just the cheapest but also offering the best advice and most complete service - then you are in a strong position to retain that business. You must, of course, ensure you continue to surround yourself with the right experts. Your insurers must remain dedicated to your customer and continue to give you the advice and support you need.

A minor impact

Although every aspect of insurance is subject to the ebb and flow of the market, niche commercial lines can be affected to a lesser degree. It is not just package insurance, so it cannot easily be undercut. Other brokers and insurers will be more reluctant to enter your market if you can demonstrate your unique understanding of it. And do not forget, while wordings and price can easily be copied, expertise and service cannot.

However, there is no room for complacency. You need to ensure your understanding develops as the market changes, so you can continue to offer the best insurance solutions available.

You will also need to weather some storms. Specialist insurance brings with it difficult risks. Caring industries, for example, will be liability-heavy, with possible exposure to complicated, and costly, injury claims and abuse. Historic properties need specialist surveying, valuation, and costly, often time-consuming, restoration in the event of a claim. However, if you have the right understanding of the risks that your customer faces, and you are able to give them the right guidance to minimise the likelihood of a claim, they will remain committed to you.

Other brokers and insurers of any size will run shy of niche commercial insurance when the inevitable complicated claims issues rear their ugly heads. This is the real test of the quality of product and service you have to offer.

Niche commercial insurance is all about understanding customers better - something no right-minded broker or insurer would argue against. Niche insurance also goes a long way towards strengthening the image that insurance is there to pay claims, not to avoid them.

Niche insurance is not just for the larger broker or insurer. Every high-street broker would benefit from the dedicated business strategy a niche specialism brings. It is about targeting business and committing to providing the very best cover at a fair price - something customers will no doubt approve of as well.

- Joe Gray, Intermediary operations manager, Ecclesiastical

A NEW SPECIALIST NICHE - HERITAGE PROPERTIES

Businesses that operate from heritage properties do not always appreciate the value their heritage property brings to their business. A teashop based in a Tudor townhouse might not attract quite as much custom if it was based in a red-brick industrial estate, for example. As a result, they can be under-insured.

The heritage nature of these properties also brings added complications, should a claim occur. The owner could face extra expense in having to comply with planning requirements, including specialist materials and crafts, and also suffer extended business interruption as a result. Even if the property is not listed, if it is in a conservation area, it can face stringent building conditions imposed on it by local planning authorities.

So, older properties and those with particular heritage value need special treatment, a dedicated product and proper surveying. These are things that not every broker and insurer can offer and, therefore, heritage needs niche commercial insurance.