Testing the Idea The hardest part of developing an idea may be proving its potential. It can also be costly.


Due to startup costs, we usually spend anywhere between $75,000 and over a quarter-million dollars to start a program. A lot of that is due to the research of getting all the loss data. Geoffrey McKernan, NSM Insurance Group


Good insurance programs are built on solid research, Geoffrey McKernan said. Sources of information include:


• • • • • •


• Census data;


Population statistics; Identifi cation and estimates of insurable entities; Estimates of potential revenue; Relevant loss data; Identifi cation of carriers that may be targeting this market; and


Identifi cation of program administrators active in this market;


Crunching numbers is just the beginning, McKernan warns. The fi nal test is to determine whether the niche is projected to remain viable and growing, including:


• •


Can it move into new geographical areas? Is it possible to fi nd enough insureds of this type to distribute risk in a meaningful way?


Copyright © 2010 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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