Best Agencies

The independent agency system is strong and getting stronger. Thanks to a focus on specialization, investments in technology and staff, as well as strong growth strategies throughout the economic recession, agencies of all sizes are showing increases in profitability today.

That’s according to the recently released 2013 Best Practices Study by the Independent Insurance Agents & Brokers of America (the Big “I”) which found an increase in profitability across most of the study’s six Best Practices independent agency revenue groups.

The Best Practices Study surveys some of the leading independent insurance agencies across the nation. Every three years, the Big “I” collaborates with Reagan Consulting to select “Best Practices” firms for outstanding management and financial achievement in six revenue categories.

The results for this year’s study are positive, says Madelyn Flannagan, Big “I” vice president of agent development, research and education.

One area that came as no surprise is the increased focus by agencies on specialization. Specializing or developing expertise in a certain industries rose in agencies of all sizes.

The study also found many Best Practices agencies planning to invest more in technology next year. The top investment choice for agencies with revenue under $5 million will be in internet marketing and social media, while agencies with revenue of more than $5 million ranked investments in agency management systems first.

But what kept agencies going through the tough times of the recession was a focus on growth strategies. Even between the worst years of the soft market and weak economy, Best Practices agencies continued to invest in strategies such as hiring new producers, adding new tools and resources, and enforcing sales accountability to achieve organic growth.

Organic growth improved dramatically since the 2012 Best Practices Study. 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.

Contingency income also grew considerably, according to the 2013 study, which played a significant role in profitability.

This year’s results show that contingent income has grown an average of 21.8 percent for agencies with revenue of less than $5 million, and an average of 10.7 percent for those with revenue of more than $5 million. Agencies also did a better job of controlling expenses.

What does all this mean? Better agencies today and a better independent agency system tomorrow.