Despite the challenges of falling premium rates, the nation's leading independent agencies continue to reinvest in their firms–mostly by hiring more staff, the latest "Best Practices" study reveals.
"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, president for education and research at the Independent Insurance Agents and Brokers of America, sponsor of the study, which was conducted by Reagan Consulting in Atlanta.
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.
It is not surprising, then, that when participants were asked the reason for their success they overwhelmingly said that regardless of agency size, it was because of "the quality of our people."
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. The average starting salary across all the revenue categories ranged from $52,000 to $95,000.
Positive organic growth was difficult to achieve for most agencies, and shareholder returns were adversely impacted, the study found. Only one study group–those agencies between $1.25 million and $2.5 million in revenue–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 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, while less than 20 indicates room for improvement.
"Best Practices" survey participants are nominated for participation once every three years. The Alexandria, Va.-based IIABA asks insurers, state association affiliates and other industry organizations to nominate high-performing candidates for each of the study's revenue categories.
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.
"Best Practices agencies are proactively taking steps to grow even in a very soft market and during tough economic times."
Madelyn Flannagan, IIABA
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