A Quality Book of Business returns a Higher Revenue per Hour and a Higher Agency Valuation

Insurance Agencies that have a quality book of business deliver a much higher revenue per hour of staff time and are able to sell the agency at a premium when that time comes. What are the characteristics of a high quality book and how can your agency achieve such results? Let’s look at some data and strategies.


A high quality book of business has three characteristics:

  1. The policies per account average 2.5 or more.
  2. The retention rate is 94% or better.
  3. The loss ratio is 50% or less.

These three items are related; accomplishing the first item helps contribute to accomplishing the second and third items. A higher number of policies per account wins you more loyalty from your client, and this in turn helps policy retention. Those who have more assets need more policies, and tend to be stable individuals with a history of having a lower frequency of claims.

Winning Quality Business

Selling on price is easy because for many customers, being the lowest price is enough to win their business. The issue with this is, it’s not good quality business. The customers you win are those who want the cheapest deal, so they will go to multiple agencies to get a better price. They are unlikely the type of person who will purchase an umbrella policy, and they are prone to leave for better pricing, and they will file a claim at every opportunity, no matter how small it is. Agencies who advertise that they will beat any rate and go to great lengths to do so will often get this type of client. Also single line of accounts are likely to increase an agency’s loss ratio.

Quality business is won by being professional, knowing your products and advising on coverage needs rather than selling on price. The agency that wins quality business is involved in the community, such as serving on the board of the chamber of commerce, volunteering for the community, or even sponsoring a local sports team. They perform annual policy reviews and send out regular newsletters. When they advertise, they advertise for goodwill and for branding their agency rather than to peddle a price. This kind of agency gets more business from customer referrals than from advertising campaigns.

The Bottom Line

Single line accounts are short-term policies; multi-line accounts are long-term policies. If a short-term account that an agency wins on price ends up costing one year’s commission in initial marketing costs and the policy lasts three years, the net revenue from that account will be two years’ commissions. A multi-line account that lasts eight years and costs one year’s commission will produce a net revenue of seven years’ worth of commissions. In addition, this account is likely to yield more total revenue because there are more policies per account. An agency that rounds accounts in this way is likely bringing in about six times or more revenue over the lifetime of the account than an agency that does not. Also, when it comes to selling the agency, an agency that has rounded out its accounts is likely to be in higher demand on the acquisition market than an agency that does not. In other words, quality agencies sell for a premium.

When it comes to building your agency, easy and instant results mean less over the long run. Investing in insurance education, in the community and in your existing client base may not generate fast results, but does provide better long-term results from a loyal client base and quality referrals. Where do you want to be in five years, treading water or climbing a mountain? Do you want to constantly quote business and win a few accounts on price or would you rather have people calling from a referral and asking you to write their coverage? Do you want to be a lower paid insurance agent or a sought after higher paid insurance professional? The decision is yours; it’s not so different from making an investment to go to college—some will and some won’t. The ones that do are the agencies that will be generously rewarded in due time.