34 / 191
2010 Best
Practices Study
Agencies
with Revenues
Between
$1,250,000 and
$2,500,000
34
Analysis of Agencies with Revenues Between $1,250,000 and $2,500,000
Mgmt. Perspectives
Profile
Revenues
Expenses
Profitability
Employee Overview
Producer Info
Staff Service Info
Technology
Insurance Carriers
Appendix
Adjusting to Health Care Reform
For agencies within the $1.25 million to $2.5 million
size group, health care concerns are not as critical as
some of the larger groups. The average firm in this size
classification has 90% of its revenue from property &
casualty commissions, and generates less than 10%
from life & health products. Still, as a large number of
the life & health clients are small, these firms may still
be impacted if and when all provisions of the recent
healthcare reform legislation are enacted.
Most firms are taking a “wait and see” approach. Either
the impact on the overall business is too small to be
meaningful or firms are unclear yet if a response to the
legislation is needed. Of the firms reacting to
healthcare reform, the most common responses are
increasing communication with clients, developing
new products and trying to increase the book of
business.
Facing Challenges
The market environment for insurance agencies in the
last few years has been uniquely challenging. The soft
property & casualty rate environment has continued,
with the typical commercial lines account premiums
declining almost 10% per year in each of 2007, 2008
and 2009. On top of that, the economy has declined.
After a multi-year recession and a sharp increase in
unemployment, the exposure base currently available
to agents has shrunk markedly from just a few years
ago.
It isn’t a surprise, then, that the Best Practices agents in
the $1.25 million to $2.5 million category rated the
market factors as the most significant challenge facing
their businesses today. In fact, the headwinds
generated by the soft market and the weak economy
combined to force organic growth negative for this
group: average organic growth in 2009 was negative
0.2%. As one agency noted, “Commercial accounts are
shrinking or going out of business.”
Beyond the economy and soft market, attracting
employees is the second most pressing challenge. The
insurance distribution system has always been a
people business, but the growth difficulties discussed
above have only intensified the focus on finding the
right people.
Finally, as almost half of these firms are headquartered
in cities with populations less than 50,000, the rural
nature of many of these firms have exacerbated both
the economic and recruiting challenges. One firm
notes that the declining population in rural America
has been an additional burden, while another
commented, “Finding good producers in a rural area is
very difficult.”
Top Challenges
(Top 5 Listed in Order of Frequency Mentioned
)
1. Revenue growth in soft market and weak
economy
2. Hiring and developing talent
3. Government intervention
4. Managing expenses
5. Competition
6. Perpetuation
Top Adjustments
(Top 3 Listed in Order of Frequency Mentioned)
1. Wait and see / No change
2. Increase client communication
3. Developing new products
“Commercial accounts are shrinking or going out of business.”