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February 6, 2014

More Keys to Growth

2 min read

Topic: Insurance Sales Insurance Agency Management Insurance Agency Growth Strategies Start an Agency Grow an Agency

Recently I shared some general observations about characteristics of growing agencies based on data from last year among the roughly 100 agencies we are a partner in. Those observations were based on pure premium growth agencies. This time, I’d like to do something similar but based on agencies which grew the most in percentage terms.

OAA is an agency developer. We start, with local partners, a number of agencies from scratch each year and we also partner with a large number of agencies who have been in business for many years.  As a developer, we are focused on growing the agencies regardless of their background. When I consider growth in percent terms, I ignore agencies under three years of age because they will obviously distort the results.

In picking agencies to consider I only looked at agencies that grew more than 20% last year. 

To grow by 20%, on a net basis, remember that a couple of things that are happening industry-wide impact the results. The first is that the market in personal lines is hard and hardening, as it is in the commercial property market. This probably accounts for 5–8% in terms of premium growth for all agencies. Another is that market access is tightening in all lines. In other words, agencies are struggling to find places to put business which tends, on balance, to help those agencies that are aggressive because they will have more market options for the customers. 

What I discovered, in looking at these +20 percent growth agencies, is pretty much what you’d expect: 

Those that grew have tried to lock the doors. In other words, they are doing things to keep their existing customers. To grow 20% with a 90% retention requires 30% new business. But if retention is only 75%, new business must be 45%, which is extraordinarily difficult to achieve. 

Those that grew have a relentless focus on growth. They are investing time and money on marketing. They are hiring, training and properly managing production staff. 

Those that grew are experimenting. I’m seeing PL focused agencies writing CL. I’m seeing both types of agencies looking for new capabilities and new kinds of customers. I’m seeing agencies that are experimenting and tinkering with their marketing programs. They are innovating. 

In a hard market, like we had in 2013, these are the keys to success. I also saw a net decrease in commission per dollar of premium. This is likely to continue into the future. So, growth is an imperative for agency owners who merely want to maintain agency income, much less grow it. What are you going to do in 2014 to grow?