Having a business strategy can help an insurance broker to position herself strategically in the marketplace. Occupying a strategic place in the market allows any business to better serve the market, resulting in higher sales and increased profits. Insurance brokers work in a competitive industry; it is therefore imperative that they choose a strategy in order to maximize their profits and to compete against other brokerage firms. In business, there are three generic strategies that are commonly employed: cost leadership, market leadership, and the niche strategy. Any one of these three strategies can be used for the benefit of an insurance broker.
Firms that employ a cost leadership strategy do whatever they can to keep their costs low. Keeping their costs low allows them to pass these savings on to consumers who will then choose them if price is a highly motivating factor. This strategy can be successful for an insurance broker, but it can also be difficult to apply. Insurance is a product that consumers try to get the lowest price on. This means that they will likely choose a cost leader. In order to be a cost leader as a broker it may require reducing your commission on sales and passing the savings on to consumers. Another way of reducing costs is to work out exclusive deals with insurance companies for promoting their products.
Firms that employ a market leadership strategy use selling points other than price to try to lure in customers. This can be difficult to do in the insurance industry because it is a price sensitive industry. A way of achieving this could include offering the quickest service, so people can have their insurance faster through you than via any other broker. Offering superior service allows a company to compete with cost leaders, but without the low prices. This makes it possible to maintain higher commissions.
Implementing a niche strategy involves focusing your efforts on a particular market segment rather than on the market as a whole. Because people look for a wide range of insurance options, often for very particular types of insurance, this can be a successful broker strategy. As an insurance broker you can specialize in particular types of insurance that are not commonly available or widely known to most brokers. For example, insurance for customized motorcycles may be difficult to find due to the number of insurers who do not offer it. By being aware of the companies that do offer it, you can focus on customers who need this specialized insurance.
Wendel Clark began writing in 2006, with work published in academic journals such as "Babel" and "The Podium." He has worked in the field of management and is completing his master's degree in strategic management.