How Insurers Can Know When to Enter a New Market or Line of Business

November 19, 2019 / 3 min read

Independent agents often serve as an insurer's eyes and ears. After all, they’re the ones who typically have the most direct contact with customers. So, when your agents ask you to develop a new product for them to sell, you should clearly do it, right?

Maybe.

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This isn’t a satisfying answer, but just because independent agents may have a wealth of local knowledge doesn’t necessarily mean they have the broader perspective necessary to successfully enter a market or identify a novel business opportunity. Sometimes, your eyes can deceive you.

Look before you leap

Before developing a product based on an agent’s request, you should determine whether the idea is truly a viable growth opportunity or if better opportunities exist that the agent might be unable to see.

Suppose an agent in Virginia has asked an insurance carrier to build a product for certain professional services, such as interior design firms or photography studios. The insurer can use data to measure the true market opportunity and, if appropriate, suggest an alternative business class, such as fitness centers, that might not be getting the attention it deserves.

The chart below shows that, while there are twice as many photography studios as fitness centers in Virginia, the premium associated with fitness centers is far greater.

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Source: MarketStance Commercial Insight.

If we take our analysis further, limiting our universe to accounts that offer more robust premiums, we can see that the opportunity presented by fitness centers is even greater. These accounts can be a win-win for both insurer and agent. The insurer can focus on getting an account that is of greater value than a minimum policy, but still fits within most insurers' definition of “small commercial”; the agent can bind a policy that can generate a higher commission.

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Y Axis: Number of companies. Source: MarketStance Commercial Insight.

Finally, the insurer should consider the growth potential of the industries being considered. As the chart below shows, while both interior design firms and photography studios have experienced more robust sales growth than fitness centers in recent years, fitness centers are expected to show greater growth in the future.

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Source: MarketStance Commercial Insight.

Keep your eye on the prize

This hypothetical use case is a strong example of the importance of data in helping insurers determine how to grow their businesses. While independent agents may have a lot of knowledge about what has been happening in their markets, they typically don’t have access to the broader perspective that only data tools can deliver—tools that can easily help you differentiate among opportunities and compare prospects for future growth.

ISO MarketStance offers a suite of solutions that can help you distill and synthesize geographic, industry, and size-of-business data into reports and visualizations that will support decision-making.