2007 Best Practices Study

Agencies with Revenues Under $1,250,000

Executive Perspectives

Profile

Revenues/ Expenses

Financial Stability

Employee Overview

Producer Info

Service Staff Info

Technology

Insurance Carriers

Appendix

Revenue per Employee (total net revenues divided by number of employees) and Spread per Employee (revenues per employee minus compensation per employee) are important productivity measures. The average Revenue per Employee in this group is $130,529 with a Spread of $61,945. These results, which increased nearly 10% over last year’s results, have been achieved through a focus on total account development (cross selling, account rounding, and upgrading) and obtaining referral business, both of which have lower new business acquisition costs. To support this focus, a significant number of the agencies pay additional incentives and/or bonus compensation to their licensed employees. “Everyone has received a bonus every month for the past two years,” noted one agent. “The program has been very successful in motivating our staff to write new business.” Ongoing employee training and education is another key to productivity, but this is often accomplished through regular staff meetings where employees share ideas and information. One agent who uses weekly meetings to educate producers and discuss marketing efforts explains, “Each producer covers all accounts they are working on each week. The collective group discusses each prospect and how to best cover the risk exposed, market to carrier, place the business and present to prospect. This helps to place accountability with each producer and encourages learning and participation by the entire group. The group dynamic is a positive for all.” It is also an example of the effective communications that many in this group point to as another key to their productivity.

Keys to Achieving a Competitive Advantage

(Top 5 Listed in Order of Frequency Mentioned) 1. The technical competence and expertise of top-quality employees 2. Good relationships with carriers that offer competitive products 3. Niche markets / program business / target marketing

4. Superior service / customer advocacy 5. Strong name recognition and reputation in the community

understanding of their markets and of clients’ needs, especially in niche markets, these agencies are frequently identified as problem solvers. The fact that independent agents partner with a variety of companies and can offer products and services that can best fit the clients’ needs provides a competitive edge, especially in rural America where Allstate, State Farm, Nationwide and other captives are strong competitors. These agencies work hard to maintain strong carrier relationships through careful underwriting and aggressively marketing to prospects that meet the company’s appetite. Like most independent agents they are very involved in their communities. They enjoy strong name recognition and good reputations because of the service they provide. While they all provide the standards—annually review coverages, send out recommendation letters with every renewal, call back clients on the same day, remarket when needed, are available on evenings and weekends, etc.—the following quote sums up how these Best Practices Agencies regard their role in their communities and the service they provide… “Our agency has a competitive advantage because of our customer advocacy following a devastating hurricane which destroyed our community. We worked diligently with both our

Gaining a Competitive Edge

“Our staff! They get it.” “Our lean and qualified staff.” “Top quality employees!” “Fantastic staff.” The agencies in this group cannot praise their employees enough and quickly identify their staffs’ technical competence, expertise, integrity and work ethic as the key to their competitive advantage. Because of the depth of insurance knowledge and specialized

3 2007 Best Practices Study | Agencies with Revenues Under $1,250,000 | Executive Perspectives