The following article was supplied by Ascend.
With the explosion of M&A over the last half decade within insurance and growth of PE-backed brokers, top agencies have quickly readjusted their focus away from growing top line revenue at all costs and taken a hard look in the mirror to see how they are able to maximize margins through calculated growth and maximized operational efficiency.
According to the 2024 Dowling Hales report, acquisitions have dropped to a five-year low due to increasing competition and increasing interest rates in 2023, putting even more pressure on agency leaders to grow bottom-line revenue over top-line growth.
An overlooked but easy place to start for agency leaders is looking at the true cost of doing business for agency billed policies.
Here are some questions to ask your agency:
Post placement, how many touchpoints on average does your team need with a customer before they bind a policy?
If payments, communication, or something else is delaying the placement to bind process, these are mostly controlled by the agency and its workflow. You should consider the customer “added into the shopping card and ready to buy” at this point. Every additional step is merely another point of friction slowing down your team, costing your business time and money for every policy.
How much time is your team spending on collecting and distributing payments?
If half of your team’s time is spent following up on down payments, missed installments, managing carrier payables – this is time spent dealing with operations, not on revenue generating activities. Even if it’s just a couple of employees, when you consider the cost to hire and retain an employee, it can easily add up to a significant cost.
What is the return on this time?
What’s the average policy size you’re dealing with? Sure, if you are exclusively writing 7+ figure policies, a manual hands-on process may not impact your bottom line (although may still provide a poor customer experience). If, however, you find yourself in the business of high volume but lower premium policies, manual workflows often eat into profits significantly when you weigh the costs compared to the revenue.
What are my repetitive labor loops?
Your staff, and people in general, are meant to build the relationships in your business – adjusting to the different needs of each of your clients. If you find your team repeating the same activities on a weekly basis, these are processes ripe for automation. Let technology handle what it does best, repetitive error free labor, so your team can do what they do best – growing the agency.
After asking these questions – you may find that for every dollar of agency bill revenue, you may be spending up to $0.60 on the dollar on just servicing this revenue – cutting your profits significantly. Any agency that’s looking to take the next step should take a hard look at this to see where they can optimize existing workflows and embrace technology to streamline any non-revenue generating activities.
