Not surprisingly brokers and intermediaries throughout the UK are becoming familiar with this message – big, niche or dead. Everywhere we look, the predictions of gloom and doom are widespread. Having attended the MISYS/Countrywide Y2K Conference in Birmingham this year, we were left in no doubt that failure to embrace new technology (and specifically the internet) would result in our demise. Again, being a niche outlet was vaunted as a possible escape route.
The whole debate on niche broking/added value and risk management seems to surface again and again.
But what is a niche broker? How do you establish a niche? Is it through building up a client bank of a similar age band, or lifestyle, through hobbies or associations, by occupation or employment? And can the internet help you to locate these clients, to market products to them and service them efficiently? Clearly the answer is yes. Sometimes. But not always. There are niches where science and technology only provide half of the answer.
Are niche markets profitable? By selecting in favour of a low risk occupation, for example, it may be possible to gather the beneficial elements of that sector. Lower rates. Branding. More sales opportunities. In theory the risk carrier will gain from familiarity with that niche and the efficiencies will reflect in commission levels to the intermediary. So how do you find a niche and where do you start?
Our company, Dickinsons Limited, has been a niche player since 1981 specialising in the veterinary market for both general insurance and financial services. It is a niche which we fell into rather than chose but our story of 20 years' expertise in this field may be of help.
Veterinary surgeons are a curious entity. They are less conservative than, say, GPs but more commercial than most of the other medical professions because they have no government subsidy and thus compete in the real world. They are loyal but unsophisticated financially.
They are busy, though ask more technical questions than you would expect. But an Ivory Towers mentality still exists. Impressive though their academic qualifications may be (five year degree courses) their general gaucheness in matters of business still characterises them to a large extent today. They do not conform to the usual business standards that are endemic in our other commercial clients.
Getting the best deal is part of their culture but they are not aggressive in the way of non-professional clients in this respect. They never expect to be corporately entertained. Even pre-arranged meetings can be cut short by an emergency. Conversely, a drop-in (which we encourage) could extend to two hours if time permits and they are keen to discuss business issues. In addition, they are almost universally honest and the moral hazard risk is so low that our loss ratios are always reflected by their business with us.
The incredibly high media profile they have received in recent years has caused massive polarisation. A reservoir of would-be vets and nurses is now on tap, but the public at large hardly seem aware that they have to pay for consultations, dispensary and operations. Allied to the rip-off Britain culture we are all experiencing, the issue of pricing and fees in the veterinary world is highly sensitive.
In 1981, I left Guardian Royal Exchange (GRE) to join a semi-retired Veterinary Surgeon and his son who were selling Financial Services to vets. There were no major brokers in this niche to tackle or emulate. This scenario would not last long, however. Having spoken to several vets we then embarked upon an exercise of creating schemes with a number of insurers for our clients main veterinary product needs, such as surgery insurance, small fleets, home insurance and mortgages. Once the schemes were established we set about picking up clients and then encountered niche difficulty number one. To sell on a national scale means you have to travel on a national scale.
Selling face to face is the intrinsic skill of the intermediary and no amount of niche capability will replace this crucial component. However, the logistics of selling face-to-face on a national basis mean either long travelling times, a sales distribution channel or forsaking personal visits in favour of a simplified telesales operation. Here I am prepared to admit that the internet is crucial to your strategy as the access it will allow you to the niche predetermines whether you are bulk selling or doing face to face visits.
Within a few short years and after a steady flow of business we then sought to expand the range of products we were offering within the veterinary profession to engineering, professional indemnity, group and individual P.A, healthcare, pensions and PHI. The business numbers began to increase but we had in no sense cracked the market because we were tackling individual veterinary practices rather than the main veterinary associations. This is problem number two. In order to obtain sufficiently quick market share and gain acceptance by reputation you need the sanction of the professional governing bodies within that niche.
Seal of approval
It is a fact that most professionals place great store upon their governing bodies. Products marketed to them through such a conduit receive greater attention and ultimately sell better. Trying to sell products to a niche blindly without an official seal of approval is simply too big a risk to take. It took us a number of years before, for example, the Society of Practising Veterinary Surgeons (SPVS) began to look upon our presence with favour. The British Veterinary Association, even today, are inclined to look upon commercial tie-ups with only a degree of detached acceptance.
Almost in tandem with this aspect is the third great problem in niche broking – getting your company name into the gaze of the purchasing market without spending a fortune on advertising. Veterinary surgeons, like many professionals are uniformly suspicious of new entrants until they have been around for a while and proved themselves. Mailshots are statistically proven to be of limited help in name association, unless they are regular. This is one area where internet awareness would be helpful but only if the majority of your niche market have access to the net.
It is a lesson hard learned that mailshots have to be read. They have to be interesting, relevant, light – but with a message. Over the years we have had preaching editorials, quizzes, advertorials, client profiles, photographs, fun pages and heavy technical content (in other words everything short of models in swimwear). The client identification process thus became problem number four.
After a decade or so the experience of regularly calling on our clients began to educate us in the mindset of the veterinary practitioner. We began to see and understand their problems. Instead of talking insurance we began to speak their veterinary language and our dialogue extended to sector knowledge. At conferences we debated the whither of pet superstores and vaccine-only clinics, at exhibitions we researched the cascade system of drug prescriptions, at congresses we gave our opinion on BSE, the Food Safety Act and emergency and out-of-hours clinics.
We became the link between practices and our knowledge became added value. As our distribution channel (sales team) expanded so did our network of contacts and information. But the organisation of an information infrastructure among staff was costly. Training new sales staff was expensive, painstaking and often time-consuming to the point of frustration.
Ironically, problem number five occurred if and when that employee left as they could use the invaluable sector knowledge they had gained in their time with us to their own advantage in new employment. There is precious little that even watertight contracts of employment can do to prevent yesterday's key staff becoming tomorrow's competitor.
Indeed, problem number six is the copycat issue and if you are successful others will copy your prototype. We have already seen how our pre-eminence in Veterinary Funding became eroded by cheap imitations. From the point of view of general insurance the unique nature of our niche led us to the creation of special policy wordings which mirror the needs of that niche.
In our case we enhanced our surgery policy, for example, to pick up accidental damage to X-Ray equipment while in use and extend cover to indemnify expensive horses stabled overnight which were clauses always missing from standard policies. At least two main insurers attempting to sell direct have since copied word for word our contract and proceeded to undercut the already marginal rate we were charging.
In 1992 we discarded consequential loss from our contract as it was considered irrelevant for rating purposes and impossible to unwrap on claims. Today no one carries this cover under their surgery policies.
There is a need to be innovative and provide something that competitors cannot. While our field force enabled us to reach the client, we sometimes need a little bit extra and we developed 'canyon' selling, which is the same as cross-selling except that our efforts go deeper and we are aiming longer term. The idea of 'canyon' is to enter into the relationship with the client thinking about things from their perspective rather than yours.
As other intermediaries turn to the internet and telesales we are able to use our distribution team to emphasise the importance of added value. In turn by word of mouth our credibility is enhanced. Again canyon selling comes to the fore. Without breaking any compliance issue I fail to understand why any well trained representative cannot discuss the whole eclectic field of finance to a satisfactory level.
To understand the workings of the stock market, the NHS, the HSE and ecommerce should be second nature to an experienced IFA. Aligning these thoughts to a veterinary framework rather than our own industry, to my mind, is the key to doing niche business.