The average customer retention rate in the insurance industry is 84%. We review the finances of hundreds of agencies every year. Our statistics show that three-quarters of them retain between 80 and 88% of their business per year. Less than 5% have a customer retention rate of 94% or more.
Agencies with a retention of more than 94% are rare. So what's the secret to achieving higher retention? In my experience, it is based on specialization. The average retention rate for agencies is 84%, but the best-performing agencies maintain a retention rate greater than 95%. A 5% improvement in the retention rate can double your agency's benefits in five years. It's a lot to take in.
But working on your retention strategy isn't as complicated as it sounds. The industry is finding ways to replenish its ranks due to the high rate of agent turnover. According to AgencyBloc, a provider of management systems for life insurance agencies, nearly 90% of agents in various lines of insurance, including life insurance, resign within three years. The growing competition of direct and digital channels, the challenge of finding new perspectives and the threat of rejection influence this trend.
It allows agents to improve the customer experience by giving customers greater control over their auto insurance expenses and options to minimize premium prices. Insurance CRM tools can also analyze customer and policy data to find potential gaps in coverage or other policies that may interest the customer. If you need help implementing a tool to increase retention rates at your agency, count on InsuredMine for a first-class insurance CRM line. Returning to the original question about how retention is taken into account in agency valuations, the surprising answer is that it plays a very minor role in the multiple of value.
COVID-19 and the more than 4 million deaths it has left around the world have forced people to face their mortality, increased awareness of life insurance and increased the need for more agents. The reality is that customers with a higher level of satisfaction and trust are much less likely to buy insurance. Northwestern Mutual's Gerend also expects a continuous influx of people who, according to him, “change careers with work disorders,” move from non-traditional environments and sales positions in other sectors to life insurance. In addition to technology for customers, such as an insurance agency's mobile app, consider investing in technology for the agency.
It is estimated that the average client retention rate within an agency is 85%, while the best-performing agencies achieve a client retention rate of 93 to 95%. Because there are so many options, it's risky to base the agency's growth strategy solely on creating new businesses. If you continue to build and reinforce that trust with your clients, you will improve your performance by improving your retention, your overall profitability and, ultimately, improving your agency's transferability. This will place the agency that invests in this area in an excellent position to have higher revenues, higher retention rates and the potential to generate a higher level of trust with its clients.
The impending retirement of baby boomers over the next decade and low retention rates challenge recruiters to keep up with the growing demand for agents. Discover the powerful economics of the emerging world of customer retention and its enormous impact on the profitability of the insurance industry. Therefore, the insurance industry is in the best position to reap the benefits of higher customer retention rates.
