Big ‘I’ and Reagan Consulting Release Results of 2022 Best Practices Study

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THE BHARAT EXPRESS NEWS INSURANCE NEWS
THE BHARAT EXPRESS NEWS INSURANCE NEWS

As the channel of independent agencies leaves the coronavirus pandemic behind and finds itself in uncertain economic headwinds, Best Practices agencies achieved record highs in organic growth and profitability, according to the Best Practices Study 2022 by the Big “I” and Reagan Consulting.

The Best Practices update is the first in its three-year cycle, which examines the companies that have recently qualified as Best Practices Agency for 2022. The annual study, conducted jointly over the past 29 years in a long-standing collaboration between the Big “I and Reagan Consulting, provides critical performance benchmarks across six agency revenue categories, ranging from less than $1.25 million to over $25 million.

“The past few years have brought challenges for independent agencies and their clients, but the top-performing agencies have shown resilience as they overcome these hurdles to grow their businesses and even break college records in numerous categories,” said Chris. Boggs, Big “I” Vice President of Agent Development, Education and Research. “These industry leaders are raising the bar and demonstrating that TBEN agency channel has never been healthier.”

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The Best Practices Study analyzes takeaways from nominated Best Practices companies across the country that have been recognized for outstanding management and financial performance in categories such as the distribution of income and expenses; revenue and profitability growth; compensation and productivity of sales and service personnel; technology costs; and representation of property damage and life insurance.

“Best Practices agencies set the roadmap for success, and agencies can use these strategies to guide them toward operational excellence as they better serve their clients,” said Tom Doran, a Reagan Consulting partner. “As these industry leaders raise the bar and demonstrate that TBEN agency channel has never been more healthy, research findings also indicate that a greater focus on producer recruitment and development is a must to sustain the industry’s progress. “

Key findings of the update include:

  • Organic growth breaks record Best Practices Study. At 9.2%, organic growth was 2.5 times higher than last year’s results of 3.7%. In this year’s survey, organic growth increased in all six sales groups.
  • Profitability remained at its highest level ever. At 26.2%, the profitability of Best Practices firms increased slightly compared to the result of 25.9% last year.
  • The rule of 20 reached an all-time high. The rule of 20, calculated by adding 50% of profitability to organic growth, hit a record high in this year’s study of 24 versus 18 in last year’s study. The rule of 20 is the best measure of the overall health of an agency.
  • The sales speed gained ground compared to last year. While a hard market continued to drive much of the organic growth, new business improved significantly in this year’s study. The sales rate was 15.5% compared to 13.2% last year.
  • Mergers and acquisitions fueled growth. In the 2022 survey results, 22.3% of Best Practices firms acquired business, compared to 16.4% in last year’s survey.
  • The recruitment and development of producers proves to be a challenge. The Net Unvalidated Producer Payroll (NUPP), a measure of producer recruitment and development, remained at 1.1% of net revenue, compared to 1.2% in last year’s survey. A healthy NUPP investment would be 1.5%-2.0%, an indication that agencies should consider redirecting some of the current record profits to investment in new producers.
  • The ages of shareholders and producers remain stable. The weighted average age of shareholders (WASA) was 53.2 years and the weighted average age of the producer (WAPA) was 48.6. Agencies need to manage these two metrics carefully, as lower WASA and WAPA are critical to the long-term survival of agencies.
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The annual Best Practices Study began in 1993 as a joint initiative of the Big “I” and Reagan Consulting and studies leading agencies and brokers in the country to help independent agents build the value of their agencies.

For more information about the Best Practices program, visit the Big “I” Best Practices webpage. To attend a free 30-minute webinar on this year’s study highlights on October 5 at 2:00 PM ET, register now.

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SOURCE: Big I

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