First started in 1993, this is the 23rd edition of the annual benchmarking analysis study
The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) has released its 2015 Best Practices Study Update. The study, first initiated in 1993, aims to help improve agency performance in order to create higher valued agencies.
“The 2015 results indicate that Best Practices agencies continue to grow and build their businesses, and increase profitability, the key components of agency value,” says Robert Rusbuldt, Big “I” president & CEO. “We were not surprised that the independent insurance agency system remains stable and strong.”
As an added benefit, every three years, the Big “I” study collaborates with Reagan Consulting to select “Best Practices” firms throughout the nation for outstanding management and financial achievement in six revenue categories (less than $1,250,000; $1,250,000 to $2,500,000; $2,500,000 to $5,000,000; $5,000,000 to $10,000,000; $10,000,000 to $25,000,000; and more than $25,000,000). This year marks the end of the current three-year study. Independent agencies are nominated for the study either by a Big “I” affiliated state association, which in Massachusetts is the MAIA, or by an insurer. Any accepted agencies must qualify based upon its operational excellence.
Nine Mass. Agencies Featured On The 2015 Best Practices Agencies List
Overall results from this year’s study found modest organic growth coupled with steady profitability among the group of 196 Best Agencies selected for this study. Among those 196 agencies selected across the nation, the following nine Massachusetts agencies were reviewed for this year’s study:
- Baldwin/Welsh & Parker Insurance Agencies, Wayland
- Chase & Lunt, Newburyport
- Fair & Yeager Insurance Agency, Natick
- FBinsure, Taunton
- J.K. Olivieri Insurance Agency, Middleboro
- Kaplansky Insurance, Brookline
- Mid-State Insurance Agency, Worcester
- T. Edmund Garrity & Co, Cambridge
- Tetrault Insurance Agency, New Bedford
What great agencies get right….
The major findings from this year’s study show that the most productive and successful agencies get focus not only on productivity, but also service staff productivity. NUPP and Perpetuation and profitability were two other areas that many of the “best” agencies focused on as well.
“The 2015 Best Practices Study results further exhibited the stability of the independent agency system despite some challenges,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “Overall, Best Practices firms continue to demonstrate their focus on operating excellence and the financial results it produces. Most of the study’s participants have either grown their business or remained steady. The industry continues to prioritize staff development and technology.”
The following are some excerpts from the 2015 Best Practices Study include:
• Service Staff Productivity: The study revealed that revenue per employee, perhaps the best overall metric of productivity, increased approximately 5% over the three-year period. In similar positive trending, expenses as a percent of revenue have declined modestly over the cycle to a 2014 average level of 80.2%. Revenue per service staff member increased by approximately 6% in the commercial P&C line of business, and by approximately 1% in employee benefits. These relative results add up given the organic growth results in these lines of business.• Productivity: New business per validated producer increased across all size firms for both commercial P&C and multi-line producers, growing by 5.5% and 5.0%, respectively, since 2012. Employee benefits producers saw an overall decline of 4.4% on the same measure for the period, likely due to the significant transformation that side of the business is experiencing right now.• NUPP and Perpetuation: The net investment in un-validated producer payroll (NUPP)–a measure of commitment to future growth by way of new producer pipeline development–has remained steady and healthy throughout the period, with an average NUPP of 1.8% for all firms. This is particularly important as many agencies seek to maintain their independence and the outstanding investment private ownership continues to represent. Critical to the goal of private ownership is the ability to both develop high performers who serve as the next generation of owners and maintain strong performance that drives meaningful ownership opportunities. In an active market that continues to reflect a strong appetite for acquisition, planning for internal perpetuation is as important as ever. Focusing on the best practices that drive agency value remains one of the best tools available to firms of all sizes looking to achieve their long-term goals.• Profitability: Pro-forma profit margins–the actual profitability of an agency if non-reoccurring/extraordinary expenses and revenue, and excessive owner compensation and perquisites are normalized–remained strong. This was the case over the cycle period at approximately 26%, with smaller firms (defined here as those with under $5 million in revenue) outperforming their larger peers (firms with over $5 million in revenue) once again in 2014, posting results of 30% vs. 22%, respectively.
For Massachusetts insurance professionals interested in obtaining a complete copy, the report can be purchased directly from the Big “I”. The e-book version costs $59.95, while a hardcover version with mail delivery is $99.95.