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

Changing Agency Demographics

year, however, it is at the top of the list, and maintaining those relationships provides the key focus for much of what they do. Since the majority of the agencies are in communities of less than 50,000 people, many in rural areas with declining populations, it is increasingly difficult to keep good stable markets. As a result, the agencies are extremely good underwriters. As one principal said, “We inspect everything. It is not worth jeopardizing a carrier relationship for a poor risk.” A focus on “growing revenues” and “being a sales organization” was very clearly articulated by these agencies because they need to feed their markets in order to maintain them. The average organic growth rate for the group was 9%. The top 25% with the highest organic growth, however, achieved a growth rate of nearly 25%. Many have specialized and developed niche markets and program business that expands their geographical marketing area from local to regional, and in many cases, nationally. Like their larger counterparts in greater metro areas, many of these agencies rely on networking and strategic alliances within and outside of their communities to provide a regular source of referrals. Whether they are a “generalist” or “specialist”, all rely on their talented, hard-working staffs to provide exceptional service which results in strong retention rates and the ability to cross-sell and fully develop existing accounts effectively and efficiently.

In prior years the annual Best Practices Study has included an “Under $500,000” revenue category. This year the study combines the “Under $500,000” group with the “$500,000 - $1,250,000” revenue group. This change addresses the challenge of identifying and maintaining an adequate number of outstanding small agencies to study. Many of the agencies nominated to participate decline to do so because the time commitment is too great or, if they do participate, they quickly outgrow the category. Combining the two revenue categories also reflects what other industry research indicates – that the number of smaller revenue-sized agencies is declining while the typical agency is getting larger. This trend, however, does not mean the small agency is doomed. A majority of the top-performers in this new revenue category had total revenues under $725,000.

Keys to Their Success

Having access to good stable markets and maintaining those carrier relationships is always on the list of the smaller agencies’ Top 5 Critical Success Factors. This

Factors Most Critical to Agency’s Success (Top 5 Listed in Order of Frequency Mentioned)

1. Accessing and retaining good carriers

Challenges They Face

2. Having talented, dedicated staff

Not surprisingly, maintaining carrier relationships is the top challenge for the agencies in this group. Many reside in areas with declining populations and/or are enduring soft market pricing, both make it difficult to meet the premium volume commitments carriers need or want.

3. Providing exceptional client service

4. Focusing on revenue growth / selling 5. Utilizing technology / efficient workflows

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