Agency Data Sellers Should Provide and Buyers Should Request

Agency statistics should always be a part of an agency profile report or prospectus when an agency is being put on the market. Buyers should also be asking for this information as this will help the buyer evaluate the agency and the price they are willing to pay. Here are some useful statistics to give a good snapshot of an agency: 

Book of Business Report by Client 

This report breaks down the entire book by client, listing the client name on one column of the spreadsheet, and a list of their policies in another column. This report should also include policy type, premium, commission and carrier. Each client is subtotaled for premium and commissions, and the entire book’s totals for those items should appear at the very bottom. In addition to the basic household and policy information, state the occupation (business type for commercial clients especially if one has high net worth clients) and city for each client as this will help give a better picture of the book. 

Book of Business Report by Carrier 

This is a simple report that indicates how much premium and commissions an agency has by carrier. Furthermore, breakdown what percentage of the premium and commissions are admitted or non-admitted. This type of report will help an agency better understand what is needed to reach profit sharing of any book; it will also help a potential agency buyer see how well the book fits in with its existing book, what appointments would be needed, and what book can be rolled into another carrier. 

Average Policy Count per Household 

This statistic takes the total number of policies and divides it by the number of clients, giving an average policy count per client. This is very important because it is an indication of account rounding and cross-selling within the agency. A good agency has cross-sold their accounts; this is an indication that there is a good relationship between an agency and its clients. It may also point out that they have a program in place to make sure cross selling is occurring with the initial relationship with the client. A good agency should have at least a 2.0 average policy count per account, and anything less than 1.5 indicates that there were minimal cross-selling efforts. Furthermore, the agency is vulnerable to losing clients. If an agency does have an average of 1.5 policies or less per account, then this may indicate that there are cross-selling opportunities. However, this all boils down to what type of accounts are on the books and the book of business report by client can give you an indication of this. 

Average Premium per Policy 

Knowing your average annual policy premium is key information that both buyers and agency owners should know about a given book of business. For buyers, an average premium that is too low may not have the best return on investment initially, but may or may not have better long term policy life since lower premium policies are not put out to bid as often higher premium policies are. A low average premium with too many single line households may be a red flag, while low average premiums with a high average policy count per household may be an indication of a solid book. A book of contractors with low premium policies may require many certificates, yet a book of professional offices will likely require less serving and a lesser amount of work when the policy is renewing. Thus, this report can provide an agency assessment by comparing the average policy count, type of accounts, and the average policy premium. 

Breakdown by Line of Business 

The basic breakdown of an agency is to break it down by Commercial, Personal, and Benefits (all LH&D lines). This breakdown by line of business should consist of two reports: one for premiums and one for revenue (commissions). Each of these can and should be broken down further; for example, personal lines should be broken down by auto, home and umbrella. Commercial lines and Benefits should also be broken down by policy type. This helps better show what markets the agency services and where growth opportunities exist. 

Location of accounts 

A location list should be done by zip code in one column and the number of accounts in the next column. It’s best to sort this on a spreadsheet by top zip code first and then in ranking order below that. The city should be included on a column to the right of the zip code. Understand that the location of the accounts is important from both a geographical as well as a demographical standpoint. This information is probably most important for a merger or acquisition with two firms located in separate areas. This will help those who seek to acquire an agency based on client location. 

Accounts by Premium Size 

This breaks down premium size into categories and the number of accounts in each category. Here is a sample:

Depending on the book composition of an agency, this can be further broken down by personal and commercial lines. This report is useful for management because it will help make management decisions on who to assign certain size accounts to; it may be also helpful to agencies that have a premium size or revenue minimums to evaluate if the agency is a good fit. 

Accounts by Revenue Size 

This report would be nearly identical to “Accounts by premium size” except the right hand column of the chart would be based specifically on revenue (commission) size. In many agencies, especially those that do benefits in addition to P&C, commission rates are different and in many cases, higher premium benefit accounts may not bring in as much revenue as P&C accounts. The amount ranges in the size column would need to be in smaller range amounts because commercials are always smaller than revenues. 

Largest Clients 

This is a list of an agency’s largest clients, and can be done either by premium or revenue size, and perhaps it a good idea to have a list of each. For commercial clients, the list should include the business type; for personal clients, the list should include the client’s occupation. This list is key for any agency, as these are the accounts that should be assigned to the agency’s best staff, if not the agency principals. These are the clients who should be on an agency’s radar during the holidays, as well as scheduled individualized contacts throughout the year, maybe even including personal visits by agency principals. These are the clients that an agency buyer should want to get acquainted within the first few weeks after the date the transaction closes. 

In addition to statistics, supporting documents from carriers, including loss ratio reports for all carriers with whom the agency is appointed should be included. This is a segment of what should be in a full agency profile report. Nevertheless, what I like about statistics is that they provide a snapshot of an agency, whether it is for someone looking to buy your agency, an insurance carrier, an insurance cluster or for your own management purposes. In addition, if an agency is looking to get top dollar for their agency, statistics can be a selling point, especially if you have a very desirable agency and the net result is maximizing the sale price of the agency.

Looking to start an Agency? Get detailed information by reading our Guide to Starting an Insurance Agency