We all know what benchmarking is, but how are you implementing it into your business strategy? Comparing operational and financial metrics against industry standards allows brokers and agencies to gain a roadmap to improve performance, close gaps, and seize growth opportunities. This blog explores how benchmarking acts as a growth engine, the key metrics agencies should track, and how data-driven tools amplify effectiveness.
Whether striving to enhance customer retention, boost revenue, or improve efficiency, benchmarking equips you with actionable insights to make data-backed improvements. Here's how you can leverage it to stay competitive and drive growth.
Why Benchmarking is Essential for Independent Insurance Agencies
For independent insurance agencies and brokers, staying competitive means keeping up with a constantly evolving marketplace. But growth doesn't happen by accident. It requires understanding where you stand, where you need to go, and how to get there. This is where benchmarking becomes indispensable.
1. Identifying Performance Gaps
Benchmarking allows you to measure your organization's performance against peers in the industry. For example, if your customer retention rate is 79%, the industry average is 84%, and the top-performing agents and brokers are at 93% or higher they are you've identified a gap. From there, you can analyze why customers leave and develop improvement strategies.
We've seen this as a key driver of change for ReFocus AI clients, allowing them to improve retention rapidly and see process improvements take place quickly.
Without benchmarks, it's challenging to recognize whether you're underperforming or excelling in key areas. Metrics act as a mirror, reflecting strengths and areas that require improvement.
2. Setting Realistic Goals
Ambitious goals are only practical when they're grounded in reality. Benchmarking provides a realistic baseline, allowing you to set achievable objectives. For instance, if the average revenue per employee in the industry is $150,000 and your agency generates $120,000, your goal might be to close that $30,000 gap over three years.
Having industry benchmarks ensures your goals aren't rooted in guesswork but based on practical, measurable data.
3. Adopting Industry Best Practices
Outside your agency, insurance industry leaders have refined processes and strategies that yield superior results. Benchmarking not only helps identify where you fall short but also reveals what top performers do differently. Whether it's deploying more effective sales strategies, leveraging technology better, or reducing operational inefficiencies, benchmarking sheds light on actionable best practices.
One example of a resource is the Best Practices Study from Big I and Reagan Consulting. The recently released 2024 edition may be found at https://www.independentagent.com/2024-best-practices-study-update/
Key Metrics to Benchmark in Independent Insurance Agencies
Not all metrics are created equal. To grow strategically, insurance agencies should focus on key performance indicators (KPIs) aligned with their core operations. Here are the most impactful ones to track:
1. Customer Retention Rate
How many customers renew their insurance policies year after year? This metric directly impacts profitability, since retaining existing customers costs less than acquiring new ones. A high retention rate often signals strong customer relationships and service quality.
Example: If your retention rate is far below the industry average, examine factors like how you approach your renewal cycles and utilize tools like ReFocus AI.
2. Policy Growth
Measuring the percentage increase in policies written during a specific time is a straightforward way to track business growth. Comparing this metric to others in your market can highlight whether your sales and marketing efforts are effective.
Example: If you're growing by 8% annually, but similar-sized competitors report over 10% growth, you may benefit from investing in additional marketing or cross-selling initiatives.
3. Revenue Per Employee
This metric evaluates how efficiently your employees contribute to revenue. If your revenue per employee is lower than that of your competitors, it might indicate the need for better training programs, streamlined workflows, or technology upgrades.
4. Expense Ratio
The expense ratio measures your operating costs relative to the revenue it generates. A bloated expense ratio could signal inefficiency, while a lower ratio suggests a lean, well-optimized operation.
Leveraging Technology and Analytics for Actionable Benchmarking
While traditional benchmarking relied primarily on manual data collection and anecdotal evidence, technology has revolutionized the process. Today, data analytics platforms provide real-time insights, dynamic dashboards, and AI-powered recommendations to make benchmarking faster and more actionable.
1. Automated Data Collection
InsurTech solutions like ReFocus AI can pull data from agency management systems(AMS) like AMS360, Hawksoft, and Applied Epic, CRM platforms, and carrier portals to provide a complete operational view of your agency's servicing performance. Rather than spending hours on spreadsheets, your team can focus on decision-making.
2. Customizable Dashboards
Modern analytics platforms allow you to visualize complex data trends in a user-friendly format. For instance, you can view customer retention trends against industry standards or track policy growth against your annual goals, all in real time.
3. Predictive Analytics
AI and machine learning go beyond historical data by forecasting future benchmarks. For example, predictive tools can analyze customer behavior to identify which clients are at risk of leaving or predict which marketing campaigns might yield the highest ROI.
Case Example: An agency using analytics discovered that a particular region consistently underperformed in policy sales. By leveraging predictive insights, they deployed targeted campaigns tailored to regional needs, leading to a remarkable improvement.
How to Start Your Benchmarking Journey
Empowering your agency with benchmarks doesn't require a monumental effort. Follow these actionable steps to get started today:
1. Choose the Right Metrics
Begin with a few high-impact KPIs such as customer retention, policy growth, and revenue per employee. Avoid overloading yourself with too many metrics right away.
2. Gather Data Consistently
Ensure that you collect accurate and timely data from internal and external sources. Use management systems and analytics tools to streamline data collection.
3. Leverage Industry Reports and Tools
Tap into industry reports and benchmarking platforms that focus specifically on insurance agencies. Associations like the Independent Insurance Agents & Brokers of America (IIABA) often provide valuable resources.
4. Set SMART Goals
Create Specific, Measurable, Achievable, Relevant, and Time-bound goals. For example, “Improve customer retention rate by 5% over the next 12 months.”
5. Monitor and Refine Continuously
Benchmarking isn't a one-time activity; it's an ongoing process. Review your metrics, compare them to updated industry data, and refine your strategies accordingly.
Turning Data into Growth
The power of benchmarking lies in its ability to help insurance professionals make smarter decisions. We strive for that goal every day at ReFocus AI, and we'd love to help you achieve more with your benchmarking.
