Pssst! Wanna Know the Secret to Survival?

I know. This is supposed to be a blog about “growing” an independent insurance agency. What’s all this survival doom and gloom?

Well, the truth is not every agency makes it long term. And when an agency dies it’s not usually because the owner wasn’t a good salesperson. There are several reasons that are common. Want to know the biggest?

It’s because the agency can’t keep its customers.

This issue is otherwise known as “retention.” In talking with hundreds of small agency owners it’s also something only the really successful ones pay attention to. Most agency owners don’t give it much thought. How do I know? I know because they can’t tell me what their retention is (beyond a guess). And I know because they don’t have a formal program in place to make sure it happens.

In my next blog I’ll have some concrete, easy to implement suggestions, for developing a retention program. Today though I want to give you a scoring mechanism and grading scale to help you see where you are.

So, first, how can we measure retention? Hopefully, your automation system has a report! If not here is how you figure it out:

Annually (at least) you run a list of customers. You then run a list of new customers first written that year. Then run a list of customers you lost during the year. Now, total up the customer list. Subtract the new customers from that. Divide the number you lost into the second list. The result is your retention rate.

If you want to get sophisticated about it, you can do this by line of business, carrier, premium, commission or some other metric.

Now that you’ve done it are you doing a good job or not? Here’s my grading scale:

A
You are retaining 95% or more of your customers. You can hardly help but grow! You are, and will be, very successful!

B
You are retaining 90% of your customers. You will see reasonable but not dramatic growth. You will be an average profit producing agency. You will be good but never great. But you are close to super stardom!

C
You are retaining 85% of your customers. You will only grow beyond 2–4 years with rate increases or a…

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