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April 1, 2014

What’s YOUR Average?

2 min read

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

By the time this post is published, Spring Training will be well underway. And as the boys of spring troop to the ball field, the has-beens, never were’s and fanatics of all persuasions will be looking at the stats. Baseball is a game of stats – and they are important – for they define excellence and mediocrity.

In the insurance agency business, we need to understand our stats as well. In the next couple of posts I’m going to talk about player (I mean producer, of course) stats. I’ve been reading my updated “Insurance Producer Profile: Compensation, Production and Responsibilities” book from The National Alliance Research Academy. They have a lot of stats!

For Personal Lines producers, the average compensation is $58,000. Interestingly, those with a Certified Insurance Counselor designation earn an average of $80,000 while those without only earn $47,000! Clearly insurance education and training are valuable…

These expensive employees are compensated by a variety of means but interestingly the average commission for new business production is 30% and 21% for renewal. So, there’s the batting average. How many points do they score?

The average PL producer has annual sales production of $115,700, and they write an average of 476 accounts new and renewal each year. The average commission per account is $281. Here’s something important:  these “average” producers have 46% of their total production as new business each year! AND their average sales growth rate is 19%!

What does all this mean

First, “average” is misleading. The numbers are always skewed by the outliers. For example, 24% of PL producers produce $25,000 of commission or less while 29% of PL producers produce more than $129,001. Similarly, the other stats quoted are influenced by the subpar producers who need to be cut from their team’s rosters and the stars who need to have their own locker room.

Second, these stats are a good yardstick for gauging your own team’s performance. Are you better or worse? If worse, you have some thinking, managing and maybe trading to do. 

The third thing that occurs to me is the value of training. Whether it’s done in the spring like in baseball or all during the year, it’s clear that an investment in professional training and education pays very nicely.

Finally, I conclude that PL Producers can make a very nice living for themselves. But I still wonder – does the team owner make a return or, like many professional sports team owners, does the owner just invest a lot of time and money for glory?