Last week we ran a story on what insurance agency ownersconsider the most important factors affecting the value of theirbusinesses.

The top 10 factors, based on a scale from 1 (leastcritical) to 5 (most critical), according to agents, were:

1. Account retention (percent of all accounts renewed annually):4.84 average
2. Quality of personnel (all employees' dedication, knowledge andexperience): 4.53
3. Quality of customer service (efficient service by knowledgeablestaff): 4.52
4. Profit margin (total revenues minus total expenses): 4.47
5. Public image (how an agency is viewed by clients, prospects andothers): 4.45
6. Account development (cross selling): 4.32
7. E&O experience: 4.24
8. Company markets: 4.22
9. Employee productivity: 4.22
10. Growth in new business: 4.18

As an outsider looking in, I was surprised to find that accountretention–rather than new business–was the driving force.

Wondering if this is a new development tied to more challengingeconomic times, I spoke with Jim Cuprisin, research director at theNational Alliance for InsuranceEducation & Research, which conducted the study.

Turns out that in spite of the world being dramaticallydifferent from 1993, when National Alliance conducted the firststudy, retention topped the list then and now–and in 2001, whenthe second study was conducted.

However, over the years, some trends have developed. Forinstance, account development (cross-selling) has risen inimportance from the first study, going from No. 18 to 10 to 6. Notsurprising, since it ties directly into retention, Cuprisin pointedout.

Other factors that have grown in importance since the firststudy were staff education (No. 11 this year) and perpetuation (No.26)–apparently a direct reflection on the graying of agencyownership.

The National Alliance put together the list of 38 factorsin 1993 with input from the Big I, based on feedback from agencyowners, Cuprisin said.

Interestingly, part of the survey included inputfrom front-line insurance company personnel–and they, too,ranked retention as No. 1 in all three studies, Cuprisin said. Infact, insurer reps and agents are pretty much on the same pageof what's important, with the biggest difference being productexpertise (which company people ranked five positions higherthan agency owners). Other differentials were market penetration(rated much higher by insurer employees), and having adequatecompany markets (ranked much lower than agents, for obviousreasons).

The study also takes into consideration agency size, and ingeneral, respondents were fairly close in what they rated asimportant, Cuprisin said. All agreed that retention was biggestissue, but public image more important for smaller agencies thanlarger ones.

As far as challenges, here are the top 10 in this year's survey,according to agents:

1. Finding and training new producers: 4.02 average
2. Achieving agency growth objectives: 3.49
3. Establishing personnel for perpetuation the agency: 3.45
4. Achieving profit objectives: 3.40
5. Instilling a sales culture throughout the agency: 3.38
6. Getting all producers to use a consistent sales process:3.32
7. Maintaining high employee productivity: 3.26
8. Establishing niche markets: 3.17
9. Earning sufficient compensation for my time and effort:3.00
10. Maintaining a quality service staff: 2.92

Do you agree?