Expansion into new markets can help your agency grow exponentially. But which markets should you pursue and when is the right time to jump in?
One way to expand your insurance agency’s business is to pursue entering a new market. Be careful though. jumping feet first into an industry without conducting the proper due diligence can be costly. Your agency could end up expending a lot of time, capital, and resources pursuing business without yielding any results.
If your agency is thinking about entering a new market, here are four steps you can take to help determine what industry is the best fit.
Define Your Territory
It may seem obvious, but before you can determine the validity of a market, you must define the territory you are willing to cover. This is a necessary step to identify both market opportunity and competitor information; crucial data in determining if and when you should enter a new market.
Perform New Market Research
While assessing a potential new market, it’s important to collect and analyze consumer information and market opportunity. It’s beneficial to target industries that function like those that you already write. This will help your agency adjust to selling to a new type of business without much of a learning curve.
For example, in 2017, when McNeil & Co. was pursuing potential new programs, we identified the animal welfare industry as a prime opportunity. Many of the Humane Societies and SPCAs that we target operate like our ESIP clients. Both often have a workforce made up of mostly volunteers, are associated with a municipality, and are controlled by a board of directors.
After developing a list of potential markets that align well with your existing expertise, you need to evaluate the potential opportunity. If there are only a handful of organizations located in your territory, you may need to move on to the next potential market.
Develop Competitor Analysis
After finalizing your list of markets for your agency to pursue, it’s time to analyze the competition. For an agent, the competitive landscape is two-fold. Make sure to evaluate both the carrier programs that service the industry you’re targeting and the other agents in your territory that are actively writing the organizations that you’ll pursue. An oversaturated market may not be worth the time and resources you would expend.
In addition to market saturation, you need to identify the strengths and weaknesses of your competitors’ products. Are there highly specialized programs available or are competitors offering piecemealed policies to their clients? The competitive landscape is a major factor in determining whether you should enter a new market.
Assess Agency Capabilities
Before you finalize entering a new market, you must ask yourself a few questions. Do you have the staffing and infrastructure in place to expand or will you have to hire more employees? Can you leverage any of your existing core competencies to accelerate growth and make the transition more seamless? Do your existing carriers offer a program for this market or will you have to develop new relationships. Assess your agency’s capabilities and address any issues and concerns before pushing your chips all-in on a new market.
Successfully entering a new market will always partially be driven by outside factors. But putting in the work in the front-end can help your agency mitigate the risk and choose the right industry.
By: Tim Woitach