How do you measure success at your agency? How do you choose the right metrics to truly know if you’re making the most profitable choices for your business? Savvy agents regularly review several key performance indicators, or KPIs, for their agencies.
Here are the four KPIs insurance agencies should track in 2023 to increase their chances of success.
Insurance Agency KPI #1: Written Premium
Written premium is your agency’s greatest source of revenue, so it makes sense that this is the first KPI most success agents track. You can measure written premium by gross premium or new premium. The amount of premium you write at your agency tells you how well your marketing and prospecting systems are working and how successful you and your team are at closing sales. It also reveals the average premium of the policies written at your agency.
Once you start tracking the written premium at your agency, you can create a plan for growing your premium base to generate greater profits and protect your agency against losses. You can also identify any potential niches you may want to take advantage of. For example, if you notice your agency writes a lot of classic cars and your loss ratio is low for this business, you may consider growing this part of your book.
KPI #2: Loss Ratio
Speaking of loss ratio, it is the second KPI insurance agencies should track in 2023. Loss ratio is the ratio of losses to the premium earned. Most of the factors that contribute to loss ratios, such as accidents and weather events, are outside your control as an agent. Despite this, loss ratio is a key indicator of whether or not the business you’re writing is profitable for you.
Though the number varies by carrier, generally, the insurance industry has an average loss ratio of 40 to 60 percent. Agents that can stay below this mark demonstrate to carriers that they are proactive in managing their books of business. It also shows that they have a basic understanding of what underwriters are looking for when they write a policy. By tracking and controlling your loss ratio, you can bolster your relationships with your current carriers and look more attractive to new ones.
KPI #3: Growth Rate
While written premium and loss ratio are the numbers agents usually track first, their agency’s growth rate is actually the most important KPI within an agency operation. Your agency’s growth rate will show whether or not you are following a forward-thinking, strategic plan. This plan should include strategies for growing all of your markets, from property and casualty to commercial, life, and excess and surplus business.
So, how do you determine your agency’s growth rate? You can look at the number of new customers you close and the number of current customers you retain year over year. Then, take into account your success cross-selling to your current book. For example, if you’re not cross-selling umbrella and life insurance policies to your P&C customers, you could create a sales process to increase your written premium in these areas.
Tracking your agency growth rate also includes tracking your marketing efforts. This not only includes your marketing strategies but your local competition, customer feedback, and carrier appetites. Incorporating these metrics into your marketing and prospecting strategy will help you add revenue and improve your ability to reinvest in your agency to increase your growth rate further.
KPI #4: Retention Rate
Retention is growth. That’s why tracking and improving your customer retention rate is the lifeblood of your agency and a KPI you don’t want to ignore. Did you know that insurance has the highest acquisition cost of any industry? It is a lot less expensive to retain a current customer than to convert a new one.
Top-performing agencies have retention rates as high as 95 percent. Increasing your retention rate by just 5 percent can double your agency’s profit over five years. How? Cross-selling policies to your current customers and receiving referrals from them increases your revenue while costing you nothing.
All you need is a plan for how you’ll nurture your relationships with your current customers. This might include:
- Pre-renewal calls
- Annual insurance reviews
- Cross-selling umbrella, life, and other policies where appropriate
- Asking for referrals to friends, family, and colleagues
Above all else, your retention plan should include a strategy for thanking your customers. Don’t ignore an opportunity to show your gratitude, whether it’s your customer’s birthday, their anniversary, or the holidays. The key is to make your customers feel important and appreciated.
Insurance Agency KPIs for Performance and Success
These are just a few of the KPIs insurance agencies need to track in 2023 to operate and run a successful agency. Smart Choice is an insurance agency network guiding thousands of independent agents through the ups and downs of the insurance market. We provide not only access to top-rated carriers and competitive commissions, but we also have a dedicated team ready to help measure your business, support your growth, and help you achieve your goals as an independent agent. Ready to become a Smart Choice partner?