How To Run An Insurance Agency: Evaluating Insurance Agency Performance

How to run an insurance agency may seem like it should be simple. However, market conditions, staffing, workload, sales, retention, processes, marketing, and accounting all come together and often collide, requiring the agency owner or leadership team to work cohesively to run and grow a successful agency. 

One key challenge that insurance agency owners face, and Agency Performance Partners helps to solve, is the lack of experience by leadership in identifying how to evaluate performance.

For many agency leaders, they may have only worked in one insurance agency, or perhaps they’ve had experience in a handful of agencies. The reality is that, in order to evaluate industry best practices, you need to connect with those practices. 

Even if you aren’t hitting these benchmarks right now, you’ll want to work toward them. In fact, in many agencies we walk into, they are actually overstaffed but still not able to get ahead. In these situations, finding the reasons and understanding the differences becomes mission-critical. Think of it this way: you may have enough people, but not enough productivity. 

Here are some major causes of this imbalance:

• Experience level
• Quality of book of business
• Lack of technology adoption
• Failure to consistently practice first-call resolution
• Footprint that demands increased staffing
• Lack of processes and procedures so everyone is spending unequal resources 
• Overservicing the least desired accounts
• Bloated procedures
• No agency standards – you work with everyone

When working on how to run an insurance agency, you want to first know the industry best practices. Second, understand your agency metrics and then become a sleuth to identify common gaps. In this blog, we’ll cover how we view agency performance, how to obtain these numbers, and common causes when an agency goes off track.

10 Insurance Agency Performance Metrics

When Agency Performance Partners conducts our Agency Assessment, we start by establishing these 10 metrics we dive deep into. As time goes on these metrics do get added to but there is a such thing as having too much information:

• Annual Book Growth
• New Business Sold 
• Closing Ratio
• Average Policies Per Account
• Average Premium Per Account
• Retention
• Backlog
• Revenue Per Team Member
• Staff Engagement
• Lost Business 

Note: at Agency Performance Partners, we do not explore agency accounting and profit margins. We recommend you contact AgencyCFO, as they specialize in the financial health of insurance agencies. 

Metric 1: Annual Book Growth

This is my favorite metric of all. I often think about insurance agencies like the game Chutes and Ladders. Every time a client or prospect has an interaction with your agency, it’s an opportunity to increase revenue, keep it neutral, or decrease revenue. There is often a disconnect among team members regarding how each and every role in an agency can support growth.

Book growth includes strategies for increasing the book size, such as acquiring new business, implementing rate increases, securing positive revenue audits, adding positive revenue endorsements, placing business with top carriers to maximize commissions, boosting retention, increasing coverage, and cross-selling.

On the “chutes” side of Chutes and Ladders, this also includes factors that decrease revenue, such as customers who leave, remarkets that reduce premium and commissions, negative revenue audits and endorsements, placing business with non-ideal carriers, lagging retention, and removing coverage.

The reason I love book growth so much is that all the other metrics support this one. As a business owner myself, when we close the year, I don’t care too much about how we grew; I care that we did grow. Now, of course, if a department is underperforming, it must be addressed, but as owners, total growth is what’s attractive.

How To Measure Book Growth

You can run the Book of Business Report in your agency management system. This report provides a snapshot of your agency at that moment in time. Each month, you can track whether you are increasing or decreasing. Additionally, to ensure data quality, if your team is not renewing non-download policies or entering premiums accurately, you may need to address data accuracy first.

How To Grow an Insurance Agency

Your agency should target 8% organic growth each year, at a minimum. This does not include acquisitions; this is straight book growth. 

To identify how to grow an insurance agency, you will review the following metrics to get an idea of which of these indicators is on track, what is flat, and what is holding your growth back. 

Metric #2: New Business

This is an area where every agency is different. Some agencies the team services and sells, in some agencies there are dedicated sales agents, in other agencies the agency provides leads or the producers are hunters. There really is no right or wrong way. I do have my preferences, but as long as you are hitting your new business goals that is really all that matters. If you are not, you may need to rethink your model. 

As agencies grow, we do recommend splitting sales and service into two different teams. The reality is most people in insurance lean more towards one of these areas. What this can mean is the area they are not as fond of they tend to make secondary in their work rather than primary. This can cause retention or new business to be inconsistent. 

How To Measure New Business

Many agencies are adopting CRM systems to help track sales. The reality is that your management system and CRM should be close when you run the new business reports. If not, there is something off that needs to be explored. The new business report is standard in most systems. 

One note, if you are not coding rewrites in your system, it’s very common for you to see rewrites in the new business report and potentially even be overpaying commissions if you pay a different commission for new business vs. renewal. This is an area we dive deep into with agencies when we conduct our agency assessment.

How To Write More New Business

New Business Monthly Sales Goals with Dedicated Sales Agents:

• Personal Lines: $45,000 per month (minimum)
• Small Commercial: $60,000 per month 
• Mid-Large Commercial: Average of $80,000 per month (depending on the size of accounts they may have some months where it’s $0 sold, we average it out)

You may be reading this and thinking, “That’s it?” or, “Oh my, we are far from this.” When considering how to run an insurance agency, there are many factors to address, including clear job descriptions outlining each sales agent’s responsibilities. For example, some agencies have a marketing manager or a virtual assistant handling quotes, which can help increase the agency’s goals

Here are some common ways you can increase new business: 

• Split sales and service so the teams can focus

• Review your compensation/incentive plans

• Set a goal based on where you are and increase the new business by 10-15%

• • Identify if you need to target larger accounts
  • Ensure you are working opportunities right at the agency: winbacks, cross sales, certificate requesters
  • Invest in marketing and or lead opportunities 
  • Create and train on your sales process
  • Ensure everyone is asking for referrals 

• Identify if you need more opportunities or boosted closing ratio (see below)

Metric #3: Closing Ratio

In sales you either need more leads or get better at closing. In fact, when I see too high of a closing ratio, I actually know that the team is not taking diverse leads. They are cherry picking clean calls in referrals and not working 5-6 lead sources. 

At APP, we do secret shopper calls and find that almost 30% of our shoppers never get a quote. Let’s be up front, your closing ratio will not be great if you don’t get a quote into the hands of the opportunity. In addition, we find that the majority of agents email the quote to the shopper and then make 1 phone call. That is not a sales process – that is a quoting process. There is a big difference. 

We make no money quoting insurance – it costs us money. In addition, growth minded agencies want to clearly see what their sales agents pipeline looks like. A sales agent with a slim pipeline needs to be focused on activity. Too many sales agents have the strategy to aggressively wait for the phone to ring. 

Your goal is ensure that your sales team is doing upfront underwriting, rejecting the opportunities that do not qualify and focusing on the ideal client targets for your agency. 

How To Measure Closing Ratios

Here is how you calculate closing ratios: Number of Closed Policies/Number of Quoted Policies

We want to target a 50% closing ratio. Now, if you have much higher, do not get too excited. If you have an 80% closing ratio, you most likely are taking calls in referral business only. Every agency should have about 5 lead sources because over time one of them will go cold. 

There is so much data in your management systems. Great sales teams will utilize both a push and pull methodology. Here are our top lead sources: Referrals, Website from Local SEO Options, Cross-Selling, Winbacks, and a paid lead source of your choice. 

How to Improve Your Closing Ratio

In thinking about how to run an insurance agency, your closing ratio matters. 

Here are some ways to boost your closing ratio:

• Create agency standards of what to reject
• Quote 4 policies per account
• Follow a written sales process
• Provide team sales training
• Hold the team accountable to a follow-up strategy
• Role play presenting quotes
• Outline how to overcome objections
• Ensure quotes are presented not emailed

Metric #4: Policies Per Account

Insurance agencies need to focus on targeting their ideal client. For most agencies, the ideal client has multiple policies, pays their bills on time, and has low claims. When clear agency standards aren’t provided, agencies tend to sell and service everyone. 

Let me paint a picture: if I have 28 policies and have needed only two service requests in five years, would I be profitable and a target for your agency? Now, consider my brother, who sometimes has just a single six-month auto policy, often needs reminders to pay his premium, and routinely swaps out 20+ year-old cars. 

Who ends up needing more service? My brother! Yet, while you’re caught up managing his needs, there’s little time left to be proactive on my account. Agencies should aim for the highest policies per account to drive efficiency.

How To Track Policies Per Account

The industry average is 1.7 policies per account, but we want agencies to aim for a minimum of 2.1 policies per account.

Some management systems have this built in, but if not no worries. In your book of business report you should be able to export it to Excel. From there you can create a pivot table of all your customers with the # of policies per account. In Excel you can highlight the number of policies and then use the Average features to get the average policies per account. 

How To Increase Your Policies Per Account

It may take some time to increase your policies per account however it is well worth it for efficiency and profitability. 

Here are a few strategies to help achieve this goal:

• Identify a cross-sale campaign 
• Increase your agency standards to require a minimum of 2 policy quotes on new business and rewrites
• Automatically quote umbrella policies
• Scripts on why combining and saving benefits both financially and time savings

Metric #5: Average Premium Per Account

Similar to average policies per household, the average premium per account is critical. If you can have less accounts with more premium/revenue, that seems like a smart business decision to me. Generally, the average policies and premium per account go hand in hand. What you do with one will impact the other positively. We do recommend you look at this metric by department. 

Commercial policies generally outweigh personal policies. Make sure you identify each department accurately so you can increase the right metrics. 

How To Track Average Premium Per Account

Due to wide swings in premiums per state, we can’t give you a target. Your goal is to establish where you are and work to increase it a minimum of 8% per year. 

Some management systems do have this built in, if not no worries. In your Book of business report you should be able to export it to Excel. From there you can create a pivot table of all your customers with the premium per account. In Excel you can highlight the premium and then use the Average features to get the average premium per account.

How to Increase The Average Premium Per Account

In order to dive into doing more with less policies, you need to get very clear on your agency standards.

Here is how we attempt to increase our premium per account:

• Prioritize higher premium accounts with client tiers
• Don’t pay commissions on accounts under a certain premium
• Cross selling & coverage increases
• Identify standards on smaller policies (pay in full, EFT, Premium Finance standards, service centers)
• Focus your marketing on your target accounts
• Winbacks focus on the highest tier accounts

Metric #6 Retention

Renewable revenue is one of the biggest attractions in the insurance space. However, when you ask many agency owners about their retention rate, the answer is often just “Good.” But “good” or “high” is not a number. 

You need to know your policy, premium, and revenue retention rates. Having all three is essential, as you may be trying to move away from lower-level accounts. In such cases, you might see a lower policy retention rate but higher premium and revenue retention rates.

The reality is that calculating an accurate retention rate isn’t easy—your data needs to be precise. However, that’s no reason to avoid it. Make this year the year you tackle and refine your retention rate tracking.

How To Track Your Agency Retention Rate

The industry average is 84%, but this includes captive and non-standard agencies. We aim for everyone to reach 92%, and, with dedicated efforts to clean up your books and implement a proactive retention strategy, to reach 96%.

If your system has a report, by all means use it! You want to see positive momentum. If you would like, you can also use this metric: 

(Total Expirations – Total Cancellations)/(Total Expirations)

You can track this on a rolling 12-month basis or month to month. I prefer month to month so you can see your efforts to increase retention take effect more clearly. You’ll need to identify when a policy lapses, whether it’s new business or just a renewal. Cancellations should not include rewritten policies, so you may need to work with your system to correctly code remarkets.

How To Increase Retention

Retention is a great metric to focus on, you can make every policy you sell more valuable! 

Here are our top retention strategies:

• Get clients on automated payments or pay in full 
• Have clients who want to cancel go to a skilled individual to save them
• Conduct annual renewal reviews
• Create agency standards on new business to write what will stay with your agency
• Incentivize your team toward retention
• Share retention rates
• Track cancellation reasons
• Create nurturing campaigns to keep your agency name in front of your clients

Metric #7 Team Backlog

This is a metric I can become obsessed with. Overdue activities, memos, suspenses, tasks—whatever your system may call them—are broken promises. Each overdue action represents a promise to a carrier, client, producer, team member, or insured. 

Backlog isn’t something to be proud of; instead, it’s essential to ensure your team stays on track and seeks help when needed. A common challenge your team may face is waiting to hear back or receive information from a carrier. They should follow up and reset the dates to help keep backlog in check.

How To Track Team Backlog

We allow team members to carry over 3 every day and be at zero on Friday. If they are in danger of missing this, the team member must raise their hand to accept assistance to come current. 

There is a report in every system that can show your team’s backlog. If you can’t find it we recommend you contact your management system. Managers need to provide help to backlogged team members so we can keep our promises. 

From there, managers need to dive into how it happened and work to streamline and optimize the team member. 

How To Reduce Team Backlog

Backlog is not pretty and agencies may need to do some Spring cleaning to get on track.

Here are a few steps to help:

• Consider Agency Efficiency Training
• Identify the total number
• Create a target to reduce the backlog
• Incentivize the team
• Watch the backlog routinely

Metric #8 Revenue Per Team Member

A common question I get about running an insurance agency is, “How many people do you need? Do you have enough staff or not enough?” In reality, many agencies have the right number of people, and some are even over-staffed—yet they still struggle to get ahead. 

It’s crucial to monitor staffing levels to understand when hiring is necessary or when staffing adjustments need to be made.

How To Track Revenue Per Team Member

To identify the revenue per team member, you can review the Reagan Best Practices Study (Page 62).

Some of you may be shocked by this number. Keep in mind many agencies have different footprints and models. In order to scale, you may need to identify how you can get all non-licensed work off your licensed team to keep everyone efficient and effective. 

How To Improve Revenue Per Team Member

Here are some effective ways to improve revenue per team member:

• If some team members have more revenue than others, redistribute the book
• Identify knowledge gaps and focus on training
• Are there any team members that are draining resources that you may need to release
• Review agency standards – your worst client need the most service
• Review your carrier portfolio can you identify who is easiest to work with 
• Consider fees for smaller account

Metric #9 Staff Engagement

When running an insurance agency, your number one largest expense is payroll. When you have a broken culture you are not maximizing your investment. In fact, in many agencies with drama, you will find that the team is focused on the gossip, not the work. 

Having a team that is harmonious in alignment and saves time, increases client satisfaction and minimizes costly team turn over. 

How To Track Staff Engagement

This may be different for everyone. We use a company called OfficeVibe.com. Each week they send out a quick mini survey to provide anonymous feedback to the leadership team on our culture and identify someone who may be struggling. 

How To Improve Staff Engagement

This can be challenging as often it starts with leadership. A broken leadership team will not have a positive culture. Our agency assessment can help your agency identify the core challenges and partner with you to convert them. 

• There needs to be a leader for every 6-8 people
• Managers need to conduct a minimum of monthly 1:1 coaching meetings
• The agency shares metrics
• Leadership proactively finds and clears out problems
• Team members get an annual review
• There is performance based pay options
• Accountability is equal for everyone
• The agency knows what winning is and celebrates wins 

Metric #10 Lost Business

When you lose a client, it often means you’ve been fired. If a client goes to another independent agency or you receive a BOR, you’ve been fired. Too often, agencies assume it’s all about price. However, when clients feel valued and satisfied, they rarely shop around. Conducting renewal reviews helps you connect with clients before they consider leaving. Identifying who left and why is invaluable. 

By tracking this, you can start training your team on how to reduce client deflections. Of course, there are always clients you’re happy to let go. You can code them as “Do Not Resuscitate” and celebrate when you pass them on to your competition.

How To Track Lost Business

Every management system has this report. We can’t tell you the ideal cancellation rate, but we strive for a 92-96% retention. Based on your book, you can calculate your loss rate. In addition, you need to ensure that you are coding remarkets so your lost business report is on track. This may also be called a cancellation report, lost business report, or lost policy report. 

How To Decrease Lost Business

Here are some effective ways to decrease lost business: 

• Renewal review calls
• Strong plan to convert someone who wants to cancel
• Payment strategies
• Drip campaigns to nurture clients
• Cross sell
• Sell life insurance to clients

Conclusion on How to Run An Insurance Agency

Running a successful insurance agency requires a balance of strategy, diligence, and adaptability. By leveraging industry best practices, monitoring key performance metrics, and addressing productivity gaps, agency leaders can optimize operations and drive sustainable growth. 

The metrics outlined—spanning from book growth to team engagement—serve as essential tools for evaluating an agency’s performance and identifying areas for improvement. By setting clear goals, fostering a proactive culture, and utilizing resources like Agency Performance Partners’ assessments and insights, agency owners can turn challenges into opportunities. 

With these steps, agencies can thrive, delivering exceptional value to clients and building a resilient foundation for future success. Incorporating effective strategies on how to run an insurance agency not only enhances operational efficiency but also empowers teams to excel in a competitive market. By continuously adapting to industry changes and client needs, agency leaders can ensure sustained growth and long-term success.

🔥 Dive into our latest blog and unlock the secrets of How To Run An Insurance Agency: Evaluating Insurance Agency Performance 

🎉 Get our FREE State of Culture of Independent Insurance Agencies

🚀 Ready to elevate your style? 🕶️ Explore our Ridiculously Amazing Insurance Agent Swag Store! 

📈 Book a meeting with our Agency Performance Partners and unlock tailored strategies for unparalleled success. Elevate your agency’s game – schedule your consultation now! 

🤝 We’re Agency Performance Partners; APP is your insurance agency’s best friend when it comes to training, strategies, brutal truth & tough love that’ll grow your agency with hugs & high fives along the way….just like a BFF. LEARN MORE!