MARKETING
Item 9 : Average premium per policy To find this amount , divide the total premium by the total number of policies .
Item 10 : Average revenue per client This is more challenging , but it ’ s the jewel of tracking numbers for every agency . To determine the average revenue per client , multiply the average premium per policy by average policies per client . For example , if your average premium per policy is $ 1000 , and your average policies per client are 1.6 , then your average premium per client is $ 1600 .
Now multiply your average premium per client by your average commission . For example , $ 1600 average premium per client times your average commission of 13 % would equate to average revenue per client like this : $ 1600 x . 13 = $ 208 average agency revenue per client .
What is a good target range for average revenue per client in personal lines ? Heavy non-standard agencies selling mostly monoline auto will be in the $ 140 to $ 180 range . In low catastrophe areas , average preferred agencies will see $ 200 to $ 275 . In more affluent areas or places with increased catastrophe exposure , the average revenue per client is higher , averaging $ 300 to $ 350 per client .
Once you know this number and you know where your business comes from , you can easily track your return on your investment . Agents who know these numbers are shooting for a 1 to 1 first-year return on all of their marketing . For example , if you ’ re spending $ 1,000 per month on Google ads , and your average revenue per client is $ 200 , you would need to write five new clients each month to get a 1 to 1 return . If you ’ re not , then you may want to consider reducing your marketing in that area . If your newsletters are driving a 1 to 1 first-year return or better based on the increased referral traffic , then you know your marketing is paying off .
RETENTION Item 11 : Retention for your entire book each month To determine your monthly average retention , you ’ ll need to know :
5 Total policies from 12 months ago 5 Total policies as of the last month-end
5 New business total policies written over the past 12 months
For example , let ’ s say 12 months ago , you had 1000 policies . At the end of the 12 months ending last month , you had 1150 policies . Subtract the 250 policies you wrote new over the 12 months from the ending total of 1150 , and you kept 900 or 90 % of the original 1000 . ( Be sure you ’ re not counting rewrites as new !)
Is focusing on retention worth it ? Here ’ s how to find out . Multiply your current annual revenue by your current retention rate . Do that over ten years . Don ’ t add in new business ; see what happens to your current book over ten years . Then multiply the same starting annual revenue by a retention number 3 points higher over ten years and calculate the difference . The chart to the left shows what it looks like for a $ 1 million revenue agency that moves its retention from 88 % to 91 %:
Item 12 : Average length of time clients stay with you Determine the number of years each client has been with you . Tracking in whole years as opposed to months is easier when you start . Add up all the year ’ s clients have been with you ( this will be big ). Then divide that total and divide by the number of clients you have . This will give you
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