Among the six insurance agencies selected for the “2013 Best Practices Study,” conducted by The Independent Insurance Agents & Brokers of America, top technology investment priorities include Internet marketing and social media for the three agencies with revenue of less than $5 million. Investments in agency management systems were the priority for those with revenue greater than $5 million
Internet marketing and social media investments ranked fourth for the larger agencies, which Insurance Agents & Brokers of America (IIABA) said may be because they already have made those investments. Across all revenue groups, 1.3 employees on average devote 10 percent of their time to social media activities.
Aside from expanding technology investments, the agencies selected for their best practices displayed increases in profitability across all six of the study’s six revenue groups: less than $1,250,000; $1,250,000 to $2,500,000; $2,500,000 to $5,000,000; $5,000,000 to $10,000,000; $10,000,000 to $25,000,000; and more than $25,000,000.
The IIABA’s “2013 Best Practices Study” is conducted in collaboration with Reagan Consulting every three years. Agencies are nominated by either a state association affiliated with IIABA or an insurance company and qualified based on operational excellence. Financial benchmarking information for the participating agencies also is reviewed and updated.
IIABA found that specialization is increasing across agencies of all sizes, facilitating targeted leads and referrals, improved retention and a competitive edge for agencies.
The average growth rate in total commission and fee revenue was 9.4 percent, up from 2.1 percent, for agencies with net revenue of less than $5 million, and 9.8 percent, up from 4.5 percent, for agencies with net revenue of more than $5 million.
Last year’s study found that growth was stronger than it had been in years. However profit margins remained stubbornly flat thanks to waning contingent income growth. This year’s results show that contingent income has grown an average of 21.8 percent for agencies with revenue totaling less than $5 million, and an average of 10.7 percent for those with revenue of more than $5 million. It was also noted that mid-sized firms enjoyed an average pro forma EBITDA margin of 29.3 percent, while the larger firms averaged 22.7 percent.
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