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Is Your Agency at Risk: Part Two

Profitable Producers Subsidizing Unprofitable Producers.

The agency owners are typically the most profitable producers you have. But if the majority of non-owning producers aren’t hitting their goals, they’re most likely unprofitable. What percentage of your producers exceeded their sales goals last year and what percent are on track to exceed them this year?

Profitable Accounts Subsidizing Unprofitable Accounts.

We know from the thousands of profit center analyses we’ve done over the years that the average agency’s “A” clients (the top 5%) are very profitable, their “B” clients (the middle 15%) are marginally profitable and the “C” clients (the bottom 80%) tend to be unprofitable. I’m not saying that’s how it is in your agency, I’m just suggesting you take a look at it. Play the “what-if” game. What if you didn’t have the top 5% of your customers? Would you be profitable? Ultimately, you may be making a profit overall, but if profitable producers and accounts are subsidizing the unprofitable ones, you are vulnerable. You are not a grocery store, where you can lose a little bit on certain items and make up for it in on other items. Insurance agencies can’t rely on volume to compensate for a loss!

Highly Productive Staff Compensating For Low-Producing Staff.

Did you ever wonder why some personal lines CSRs can only handle 500 to 750 accounts and others can handle 1,500 and more? Or why the average personal lines CSR handles about $300,000 in revenue when we’ve seen it as high as $650,000? If you have certain service and administrative staff that are really efficient and highly productive, it may be that they are subsidizing the less productive people. The same applies to commercial lines. Some commercial lines CSRs can handle only 250 to 300 accounts and others handle 500 to 750? Although it will vary greatly, the average commercial lines CSR will handle around $400,000 of commission revenue. However, we’ve seen it well north of $1 million. In both personal and commercial lines, it’s the same systems, the same insurance products and carriers, and the same management. That tells me there’s a talent, accountability and management problem!