US independent insurance agencies boasted an average of 7.3% organic growth in 2014, a new report from
Marshberry reveals.
That’s about on par for typical growth over a one-year period, and even represents a slight increase from 2013. In fact, the report noted that the average was the highest it has been since the Great Recession.
Some agencies, however, fared slightly better. Termed “high-growth agencies,” these groups consist of the top 25% respondents based on organic growth and had a better performance with a 17.5% growth rate – almost 2.5 times the average.
They also shared certain common denominators.
While high-growth agencies were found across the country, some US regions outperformed others. Agencies in the West and Southwest, for example, grew at rates of 10.7% and 9.8% respectively. According to the Marshberry report, these two regions experienced the highest economic growth compared with other regions and outperformed the nation as a whole. On the opposite end of the spectrum, the East lagged with a growth rate of 5.8% while the Southeast and Midwest clocked in at 6.2% and 6.8%, respectively.
High-growth agencies also boasted a higher rate of new business production as a percentage of prior year total commissions and fees, at 17.8% versus 12.5% for average agencies. As Marshberry noted, an agency needs to write new business production of at least 15% of prior year commission and fees to more than offset the average attrition rate of 10%.
While high-growth agencies met this mark, average agencies did not and “are at risk if the economic conditions and rate renewals soften further,” the report warned.
Additionally, high-growth agencies were more likely to rely on new business that comes from broker or agent of record letters – 43% of new business fell into this category for high-growth agencies versus 30% for average agencies.
Perhaps as a result of their high growth, the top 25% of respondents were also more likely to push towards niche and industry specialization. The average agency indicated 2.8 niches exist within their current book of business, a number that increases as agency revenue rises.
Agencies with greater than $20 million in revenue, for example, reported slightly fewer than seven niches in their book of business while agencies with less than $5 million in revenue reported fewer than one.
To assist other agencies in becoming high-growth organizations, Marshberry asked survey respondents to rank eight strategies in order of their importance in helping their agency reach its organic growth goals. Heading the list were the relatively unsurprising “new business prospecting” and “hire new producers.” A focus on larger accounts and enhanced producer accountability were also ranked as important, while “technical education and training” and “hire additional service personnel” fell to the bottom of agency priorities.
Marshberry concluded the report by urging agencies to benchmark their performance relative to their peers in order to “discover…weaknesses early on [and] identify opportunities for growth and areas in need of improvement.”
Such benchmarking means agencies are “more likely to take action and execute a strategy,” the report said.
