Magazine article Risk Management
The Trend toward Market Specialization
MANY COMPANIES are extending their global reach in order to stay competitive into the next century. At the same time, however, some insurers are contracting their books of business and specializing in certain markets and coverages in order to sharpen their Competitive edge.
"The trend toward specialization doesn't sound exciting, but it is probably among the most far-flung changes in the history of insurance and will drastically affect risk management," said Lawrence Drake, managing director of Marsh & McLennan Inc.
The difference between a generalist and a specialist, according to Dennis Kane, president of CIGNA Special Risk, is that a large independent agent or generalist "tries to be all things to all clients, whereas a small independent agent can focus more intensely on specific coverages." Mr. Kane says that perhaps the best place to be is holding the middle ground between the two extremes, an area populated by focused companies who pursue business in "attractive niches."
Focused companies, in Mr. Kane's view, are those companies led by experienced professionals with few distractions that deliver prompt services and are consistent and disciplined in their underwriting practices over time. "A structurally sound market and commitment to client needs are paramount concerns in specialty markets," he says.
According to Charles Clarke, president of The Travelers Insurance Cos., watchful executives at the company saw a soft insurance market on the horizon five years ago and knew that Travelers needed more than just an accent on service to successfully weather the rough times. "We were not good at slugging it out on price like other companies," Mr. …