The IIABA has been publishing the triennial study since 1993
Every three years, the Independent Insurance Agents & Brokers of America joins forces with Reagan Consulting to observe and evaluate what the best agencies are doing right. The IIABA and Reagan Consulting them compiles its survey and study of the most successful agencies in the nation into its “Best Practices Study.” Since 1993, the IIABA has published this triennial study in order to help all independent insurance agencies learn what the leading agencies are doing right in order to help all agencies improve their agency performance to create a higher value agency.
The agencies selected for review in the study are nominated either by a Big “I” -affiliated state agent’s association or else by an insurance company. All agencies are qualified for review based upon their operational excellence and are grouped and reviewed for the study in six revenue categories: Agencies with less than $1,250,000; agencies with $1,250,000 to $2,500,000; firms between$2,500,000 to $5,000,000; those with$5,000,000 to $10,000,000; agencies between$10,000,000 to $25,000,000; and those with more than $25,000,000.
Sixteen insurance companies and four industry vendors finance the Best Practices Study: Agency Business Solutions/Amerisure Insurance, Applied Systems, Beyond Insurance, Central Insurance Cos., Chubb, CNA, EMC Insurance Companies, Encompass Insurance, Erie Insurance, Great American Insurance Group, The Hanover Insurance Group, Harleysville Insurance, Imperial PFS, InsurBanc, Kemper Preferred, Liberty Mutual Agency Corporation, Main Street America Group, Ohio Mutual Insurance Group, Travelers and Westfield Insurance.
What the best agenices are doing in 2013
“The results of this year’s Best Practices Study reveal several positive findings for the independent agency system,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “Most study participants have grown their business and invested in staff and technology.”
Here is a list of the highlights from the IIABA Study of what the most successful agencies are doing:
- Specialty or Niche Markets: Specialization has increased across agencies of all sizes. Developing an expertise or proficiency in a certain industry or product has shown to facilitate targeted leads and referrals, improve retention and provide a competitive edge for an agency.
- Technology Investment: Many of the Best Practices agencies plan to invest in technology for the coming year. The top investment choice for agencies with revenue under $5 million will be in internet marketing and social media, while agencies with revenue over $5 million ranked investments in agency management systems first. Internet marketing and social media investments ranked fourth for the larger agencies, perhaps because many of these firms have already ventured into these fields. Across all revenue groups, the average number of agency staff members who devote time to social media activities is 1.3 employees and that accounts for approximately 10% of their time.
- Service Staff Productivity: This year’s study took a new approach to measuring service staff productivity. Rather than identifying the average book of business serviced per account executive (AE) and customer service representative (CSR), the study combined all service positions—AE, CSR, processor, marketer/placer and claims—by line of business, and did not include administrative staff members like accountant or receptionist. This change provided clearer access to the total number of people the typical Best Practices agency use to service the revenue in its commercial, bonds, personal, group life-health and individual life-health books of business. The study also provides a salary range for each of the four service staff positions.
- Organic Growth: As expected, organic growth has continued to improve dramatically since last year’s study. The average growth rate in total commission and fee revenue was 9.4% (up from 2.1%) for agencies with net revenue of less than $5 million, and 9.8% (up from 4.5%) for agencies with net revenue of more than $5 million.
- Growth Strategies Worked: Between 2007 and 2010, when the soft market and an extremely weak economy made positive growth nearly impossible, Best Practices agencies continued to invest in growth strategies that would allow them to achieve organic growth and obtain a competitive edge as conditions improved. The results of those strategies—which include hiring new producers and equipping them with new tools and resources, enforcing more producer accountability, focusing on specialty/niche areas and expanding marketing/advertising activities—has paid off.
- Profitability: Strong revenue growth improved profitability. Although last year’s study results identified that growth was stronger than it had been in years, profit margins remained stubbornly flat thanks to waning contingent income growth. That trend has now reversed. This year’s results show that contingent income has grown an average of 21.8% for agencies with revenue totally less than $5 million, and an average of 10.7% for those with revenue of more than $5 million. At the same time, agencies did a much better job of controlling expenses so that operating profits grew faster than contingent income. The result? Smaller to mid-sized firms enjoyed an average ProForma EBITDA margin of 29.3%, while the larger firms averaged 22.7%.