2011-09-21 Press: Niche Agents Beat the Market with Specialization

By Laura Mazzuca Toops, PropertyCasulaty360.com

For a 100-year-old agency with deep roots in traditional insurance, Thoits Insurance has a forward-thinking attitude when it comes to technology. A self-described generalist agency that specializes in cyber liability risk, Thoits prides itself on being “a generalist agency which has been fortunate enough to specialize in a few profitable niches,” said CEO Paul Saich.

Thoits has approximately 75 employees handling $125 million in annual premium with a corporate office in San Jose, California and an additional office in Santa Cruz, California.

Niche/specialty business comprises approximately 20 percent of Thoits’ annual premium volume, with a special emphasis on the rapidly expanding cyber liability market.

“The general concept for cyber liability really kind of started taking off about 18 months ago,” said Ted Way, client executive and cyber and management liability practice leader at Thoits. “That was when we started making these submissions on a regular basis.”

As is common in emerging markets, there is plenty of uncertainty in the cyber liability arena, such as who is liable, what steps are required to protect information, and what is considered sensitive information, Saich said. “We like our clients to err on the side of caution and understand that this exposure is not going away, that is, unless the Internet does,” he said.

Thoits’ reputation as a generalist actually assists the agency in spotting trends that could turn into niches. “Being a generalist gives us constant exposure to multiple lines of business that we can evaluate and determine if it is worth investing our resources in creating a niche,” Saich said. “As an agency, we work with our partner carriers to see where we could carve out a niche given our existing book of business. We would never go into creating a program/niche without having a partner carrier willing to move forward with us from the start.

A niche/program is never built on price, it's always built on coverage—and a program’s ultimate success invariably hinges on the carrier, Saich said. This requires a lot of preliminary research about the potential niche before the agency should even think about approaching a carrier, he said.

“If you have done your homework, a program/niche will be priced based off the credibility of the risk. It is up to the broker/agent to bring the best in class to the program. If you bring the best in class to the carrier, the price will be easily achieved. What attracts an insured to your niche/program is the coverage offering. Once the insured is in the underwriting stage, the broker/agent and partnered carrier will evaluate their credibility and make sure the insured is willing to accept the loss control and risk management requirements that make a niche/program successful for years to come.”

Saich’s advice to an agency interested in getting into the niche program business?

“First, evaluate and understand your book of business. Next, work with your partnered carriers to see if there is a common interest in a specific class of business. Once this is determined, make sure you can set yourself apart with a coverage position or risk management offering that will attract additional insureds to your agency. Again, if you do your homework and underwrite effectively, price will not be an issue.”

About Thoits
Established in 1891, Thoits Insurance is a regional California insurance brokerage, employee benefits and risk management consulting firm owned by its employees. Thoits serves the needs of the Bay Area’s peninsula and Silicon Valley by determining risks in all areas of business and protecting its clients against these risks.

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