Another record year, but profit margins are flat, says Reagan Consulting
Independent insurance agencies and brokers across the country had another record-breaking year, according to the year-end 2022 Growth & Profitability Survey (GPS) from Reagan Consulting. However, rate increases, and inflation were the driving forces behind this growth, not new business, leading to flat profit margins.
The survey shows that the median organic growth in 2022 was the highest in Reagan-recorded history, measured at 10.2%. This number exceeded the 2021 median organic growth by almost two percentage points. Fourth-quarter (Q4) median growth rates for 2022 by product line include 12.6% for commercial lines organic growth, 7.5% for personal lines growth, and 6.0% for employee benefits.
With that growth rate, however, “one would generally expect profit margins to rise,” says Reagan. Instead, they’re staying “at a consistent level,” not rising.
While Reagan Consulting’s Bobby Reagan remains optimistic about the industry’s future, he cautions that external factors such as a recession, a reduction in inflation, or the moderation of property-casualty rates could impede growth. Reagan advises independent insurance agencies and brokers to prioritize account retention, increase new business sales, and improve operating efficiencies to remain competitive in the current climate.
“Our industry seems well poised to continue to prosper,” says Reagan. But he adds that in the current climate, agent and broker growth could be impeded by a recession, a reduction in inflation or the moderation of property-casualty rates. These are “all external factors beyond our control.” He advises agents and brokers to “do a better job on account retention, increase new business sales and improve operating efficiencies … Do not assume it is business as usual.”
More about the Reagan GPS Survey
The Reagan GPS was formerly known as the Organic Growth & Profitability (OGP) Survey. Each participating agency in the GPS receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan’s quarterly commentary of industry trends affecting agents and brokers. For information on participating in the survey, contact Michelle Appelbaum at 404.869.2541 or michelle@ReaganConsulting.com.
