Despite the challenges of falling premium rates, an annual study of independent agencies by the Independent Insurance Agents & Brokers of America finds the best agencies continue to reinvest in themselves.
"This year's study indicates that the Best Practices Agencies are proactively taking steps to grow even in a very soft market and during tough economic times," said Madelyn Flannagan, IIABA president for education and research.
Although positive revenue growth was difficult to achieve, Best Practices agencies continued to invest in new staff. The majority of those agencies with revenues over $2.5 million hired at least 1.5 new agents during the last fiscal year, with the largest agencies hiring an average of 9.4 new producers, the survey reported.
The average starting salary across all the revenue categories ranged from $52,000 to $95,000.
The largest agencies, those with revenues over $25 million, tended to hire more experienced producers while those in the lower revenue categories tended to hire producers with less sales and or insurance experience.
Positive organic growth was difficult to achieve for most agencies and shareholder returns were adversely impacted. Only one study group, the $1.25 million to $2.5 million revenue group, achieved a "Rule of 20″ outcome greater than 20, the desired threshold.
The "Rule of 20″, a new benchmark introduced last year, is a formula designed to quickly understand whether or not an agency is creating significant returns for its shareholders. A score of 20 or higher means an agency is generating returns equal to or greater than typically expected. Less than 20 indicates room for improvement.
Best Practices participants are nominated for participation once every three years. The Alexandria, Va.-based agent's association asks insurers, state association affiliates and other industry organizations to nominate high performing candidates for each of the studies' revenue categories.
This year's study shows, overall, that agencies are doing much more with less staff, and the organic growth rate was much stronger than expected.
When participants were asked the reason for their success they overwhelmingly said, regardless of agency size that it was because of "the quality of our people."
The study and a listing of the "2008 Best Practices Agencies" can be accessed at www.independentagent.com and www.reaganconsulting.com or directly at bp.reaganconsulting.com.
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