Take Carroll Insurance in Maumee, Ohio, a suburb of Toledo. With only four employees, the agency is licensed to do business in 43 states and specializes in restaurants, pizza franchises and law firms, says partner Mike Carroll. He began specializing in 1997 after seeing limited competition and a “major pain for the consumer.”

The agency works closely with insurers and wholesalers to develop the business (Allied, Travelers, Argo and Employers for restaurants; Guarantee and AIG for pizza; Zurich, Admiral and Chartis for lawyers).

Carroll is so conversant on the topic that he's written books on all three niches. Check them out at Thebestroibook.com, Insurepizzeriabook.com and Insuringlawyerbook.com.

Then there's Hobson Insurance in Hobson, Mt., population 250, specializing in archery ranges, gun stores and ranges, shoe retailers and sporting goods stores. Vice president Kristy Longfellow-Hodik co-manages the family agency with her sister, Misty Longfellow- Kriskovich.

The sisters' parents launched Hobson in 1995. Their father began specializing with two buying groups and the agency grew through word of mouth. Now 13 different buying groups and associations endorse Hobson and it's licensed in 48 states, she said. Dad is now retired, and mom does accounting for the company.

Unlike Carroll, Longfellow-Hodik is more reluctant to share the secrets of Hobson's success. The increase in agencies finding a specialization means more competition. And although Hobson's long-term expertise in its chosen niches makes it hard to beat, they still feel competitive heat from the local insurance agent. “But people want the best bang for the buck,” she said. “Being highly recommended by other association members helps a lot.”

Positioning yourself as an expert means increased professionalism and Hobson encourages its 10 employees to get CIC and other designations to further set the agency apart from the wanna-be's.

But the biggest challenge, she says, is the constantly changing market that has insurers shifting their focus in the neverending quest for premiums. Some companies decide to cancel a program after years of success, leaving the agency stuck with an entire book of business that needs a new home. This causes major upheaval because it usually means disgusted customers will shop around for another agent.

Another problem: An agency spends time researching and developing a viable program for an insurer on an exclusive basis—only to have the insurer say it's not interested, then turn around and release the program nationally on its own. “You're giving away all that work,” Hodik says. “Be sure to get it in writing that the program is exclusively for your agency.”

Specialization has its ups and downs, but it's one of the major ways independent agencies can set themselves apart from the generalists and direct writers who are howling for blood. Specialization is like insurance for the insurance professional—it protects your business. Like any insurance, it requires some research and costs some money. But when it's done right, it can help protect your agency against the loss of profits to commodity sellers.