WHAT is the next “big thing”? Like investors, insurance agents and brokers are constantly searching for the next fast-growing business segment to target. Insurance sales managers always want to give their staffs a growing business segment to pursue, while their marketers then struggle with insurance company underwriters to convince them to write the business competitively.

Of course, putting together a program for a particular segment is always the preference. However, as most underwriters will tell you, it helps to start out with a group of clients ready to take part in it. That way, there is adequate “critical mass,” which gives the agent and proposed program credibility in the eyes of insurers. If a broker has already successfully targeted a particular sector and has developed a significant client base, then half the job of creating a profitable program is done.

Our firm had such historical success in the real estate sector, which we first targeted and later created programs for. In developing these programs, we have made use of purchasing groups. Congress authorized them, as well as risk retention groups, in the 1981 Product Liability Risk Retention Act and the 1986 Liability Risk Retention Act. Purchasing groups allow groups of insurance buyers with similar risk characteristics to band together to purchase various lines of liability insurance from one underwriter via one master insurance policy. The theory is that a group's collective purchasing power results in reduced insurance costs per buyer and more leverage for the broker working on the group's behalf. The purchasing group insurer (or a consortium of insurers on a layered program) issues a “master” insurance contract. Certificates of insurance are then issued to each buyer desiring coverage through the purchasing group.