2010 Best Practices Study

Analysis of Agencies with Revenues Between $1,250,000 and $2,500,000

Mgmt. Perspectives

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.

Profile

Top Challenges (Top 5 Listed in Order of Frequency Mentioned )

Revenues

1. Revenue growth in soft market and weak economy 2. Hiring and developing talent 3. Government intervention 4. Managing expenses

Expenses

Profitability

Employee Overview

Producer Info

Staff Service Info

5. Competition 6. Perpetuation

Technology

Insurance Carriers

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.”

Appendix

Top Adjustments (Top 3 Listed in Order of Frequency Mentioned) 1. Wait and see / No change 2. Increase client communication 3. Developing new products

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

2010 Best Practices Study

Agencies with Revenues Between $1,250,000 and $2,500,000

“Commercial accounts are shrinking or going out of business.”

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