As you know, Agency Consulting Group, Inc. collects the data for our Composite Groups throughout the year. Benchmarking participants submit their information anonymously separating the Agency’s identity information from their financial data. We do this for security purposes. Next, we segregate the data into one database and the agency identities into another so we have no way of knowing which agency belongs to which data set. As a free service, those who Benchmark their agency and submit their data to Agency Consulting Group, Inc.’s Composite Group Study gain access to the live data base for an entire year. For a $30 fee, agents asking for a Quick Analysis also get a ‘Snapshot Comparison’ of their most recent year’s performance in every category against their Composite Group.
The Composite Group may range from the nationwide group of agencies of similar size (under $1 Million, $1 Million to $2 Million, $2 Million to $3 Million and over $3 Million,) to Statewide Groups sponsored by State Associations and even to Size Groups within States for states submitting enough agency data sets to be statistically sound. Call us for more information regarding if you are a State Association wishing to sponsor creation of your own State Grouping.
This year we saw more dramatic shifts from Group 1 (agents under $1 Million revenue) and Group 3 (agents between $2 Million and $3 Million) than we have in the past.
Group 3 agents either grew through acquisition and/or merger or were purchased by larger agencies faster in 2012-2013 than previously. More Group 1 agents were purchased or absorbed than grew into Group 2.
The numbers of participating agencies in each size group change every year. It is difficult to determine if agencies are moving from one size group to another or are being sold because their identities are not tied to historical or current data sets. Agency Consulting Group Benchmarking system asks for two years of data in our data sets each year to allow for growth comparisons. We can tell that there are less agencies in the smaller size group (under $1 Million) and in the medium size group ($2-$3 Million) than there were in the last year.
Health Insurance and Obamacare:
The good news is that reporting agencies experienced greater than 5% growth in the last year in P&C income and higher contingencies. The “challenge” has been in the L&H income side where agencies have shied from health insurance growth because of uncertainty in the health care industry and the Exchanges. For some reason, life insurance sales have also been affected, although one has little to do with the other.
We recently separately met with a bank agency and a dedicated health insurance agent. Each indicated an intense excitement about the ramifications of Obamacare, whether successful in its current iteration or if it is altered, either slightly or dramatically. These weren’t politically motivated discussions. They were about two agencies concerned with educating their constituents about what was happening and giving them the best information to allow them to be insured. Both groups indicated an expectation of 20% to 30% more people involved in health insurance in one form or another over the next few years. Both agreed that the law was unmanageable and difficult to implement in its current state and that these facts made it imperative for agents to approach and help educate their clients and prospects. Doing so will, inevitably, cause a myriad of opportunities IF the agencies have full line relationships to permit both health insurance, life insurance and all other forms of insurance to be analyzed at the time of the contact.
If you, as agents, can learn about Obamacare, you know much more than the public you are serving. If you can present yourself to aid them in the understanding of how the Health Care Act will affect their situation (their coverage, their cost, their tax bill), they will look upon you as the EXPERT and will use your services, adding to your credibility and your revenue base.
Agency Productivity:
Productivity factors have also continued to trend up with Revenue per Employee reaching $125,000 in the smallest agencies (under $1 Million) and exceeding $131,000 on average in the largest agencies (over $3 Million). The reason for the productivity growth in the Group 1 agencies appears to be more from deterioration of weaker agencies and the maintenance of the stronger small agencies in the domain while Group 4 agencies continue to monitor and enhance workload and workflow efficiencies. Agencies are doing more with less employees through better use of automation.
The most important factor in an agency must be profit and the most important productivity factor is Spread (the difference between Rev/Employee and Compensation/Employee) because most other overhead is generally fixed, leaving more of the Spread dropping to profits each year. Group 1 was an anomaly because of the dropping numbers. Rev/Employee remained constant while Spread declined 5% although Profit/Employee increased by 7%. Group 2 ($1MM to $2MM agencies) Rev/Employee grew by 1.6%, Spread grew by 2.3% and Profit/Employee grew by almost 11% Group 3 ($2 MM to $3 MM). Group 3 ($2MM to $3MM) lost ground as it lost agencies to those growing into or being absorbed by Group 4 (the larger) agencies. Group 4 Rev/Employee grew by 2.4%, Spread grew by almost 8% and Profit/Employee grew by 10%.
What this means to us is that the active agencies are either growing by acquisition, by organic client growth or by both in every size group.