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Characteristics of
Successful Mid-Size Insurers: Part
1
 The Nolan
Company has the good fortune of working with all the different sizes
of insurers and financial services companies, from the largest
multibillion-dollar entities to those whose revenue and premium
bases are less than $100M. While a great deal is written about the
characteristics of the very large (or at least
the
best-publicized) companies, less is noted about the smaller
companies and what makes many of them so successful. To that end, I
am dedicating my next two Nolan newsletter articles to the
characteristics of great mid-size insurers.
Yes, there has been substantial consolidation within the
P&C, life, health, and banking industries over the past decade.
Some sectors have consolidated by as much as fifty percent within
the past 10 to 15 years. Even still, small to mid-size financial
services firms continue to thrive and grow, and there are countless
examples of companies that continue to endure in the land of much
larger competitors.
The first noteworthy attribute is an ability to identify
and exploit niche markets. The smaller players who've been
successful have scanned, screened, and realized niche market
opportunities faster than their competitors. Niches can include
specialization of product, channel, customer type, or a combination
of the three. For example, one client saw an opportunity with a
number of its largest agency partners to exploit a new product
placement. While the product was only placed with a handful of
agencies, the size and profitability of the niche placement made
good business sense for the client. Niches can also include business
that might be considered
non-core to many, such as third-party
processing or service fee businesses. Companies that successfully
realize niche opportunities maintain a markedly different culture
and mindset—they are focused on business development and are highly
entrepreneurial. They look at how to make an opportunity work, not
find reasons that it will never work. While opportunistic, they are
highly disciplined, subjecting every niche market being explored to
the fundamental question, "How much would this business add to the
bottom line?" In terms of cost-benefit analysis, niche markets are
often too small for large competitors to consider, but they can
often be very attractive to the mid-size firms who have access and
the ability to capture them.
Exploiting niche markets cannot be achieved without the
ability to find and source the opportunities. Those who exploit
niches well, maintain a close pulse on the market through
intimate relationships with channel partners, customers, and the
local marketplace. Mid-size financial services companies often
cannot afford big research departments and large investments in
traditional market intelligence; instead, they leverage their
customers, channel partners, and the relationships of their senior
management to keep them in the flow of ideas and opportunities. Yes,
necessity is the mother of invention; that is why successful
companies have very close, sometimes family-like relationships with
their customers, who are most often agencies and other channel
partners. Being close with their partners and customers allows
companies to identify possibilities before they become known by
others.
Because niche prospects often spoil quickly, the best
mid-size companies listen carefully to the market and act
swiftly. These companies are truly nimble and are able to act on
market opportunities in days or weeks vs. months or years. They are
able to move forward on market niches with measured experimentation
and minimal bureaucracy. Their behaviors, people, and culture are
focused on problem solving, and they value content and good ideas
over tenure, hierarchy, structure, and empire-building. They have an
adaptable human resource model that allows them to add businesses to
the operation while minimizing the traditional human resource and
organization structures. And their internal metrics and rewards
systems keep management's attention and actions fixed squarely on
top-line growth.
These are just a few of the core characteristics of mid-size
companies that are flourishing in today's world of larger scale,
consolidation, outsourcing, off-shoring, and commoditization. We
look forward to sharing the second half of the story in a
future
e-Newsletter. Until then…
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