Agency performance reporting – What carriers look for & how they evaluate your agency
Insurance companies evaluate the insurance agencies they contract with in a very similar fashion to how agency owners evaluate their sales personnel – with reports and/or scorecards.
Similar to how insurance agency owners should focus on the numbers that are key indicators of performance, so do insurance companies. Many times insurance companies boil down their figures to a lowest common denominator to simplify their strategy so both their marketing personnel and the agency force as a whole can understand it. And more often than not this over simplification leads to a failure on both ends – failure of the insurance company to effectively communicate it’s intent and a failure of the agency force to understand and in turn deliver what the insurance company truly wants.
Common Metrics and Targets…
- Premium Growth
- Policies in Force (“PIF”) Growth
- Policies in Force (“PIF”) Retention
- Premium Retention
- Utilization of Automation
Growth and Retention Goals
Growth and Retention goals are some of the most common and appear very simple to understand, but can still have some complexity in them. Many times the goal of an insurance company for an agency is “Net Growth” and not straight new business production. Net Growth includes both new production and attrition (lost production, or lost business). You may very well have a banner year when it comes to new business production, but if you’re agency is losing clients out the back door nearly as quickly as you’re acquiring new ones, then are you really getting ahead?
I’ve had one carrier representative come in to our office over the past 3-4 years and have his/her guidance and suggestions for what our agency should focus on shift with the ever-changing wind. Due to this our team kept shifting strategy when it came to trying to meet our commitments with this carrier until we realized what the actual target was – equal parts Net Growth and continued incremental reduction in Loss Ratio.
The importance of metrics is a universal NEED in our industry, however the importance of one metric relative to another can differ just as many times as the number of people you ask.
In the end, if you don’t know your numbers then you can’t evaluate the numbers of your carrier partners to ensure that you and your organization are evaluated fairly. It is my recommendation that you keep your figures available and your commitments in writing so that you can pull them out whenever you or a carrier partner has a question.
Matthew Davis, MBA, CPCU, AAI