Will insurance producers “lift-out” or stay?
Since 1993, Reagan Consulting and the Independent Insurance Agents & Brokers of America (the Big “I”) publish the annual Best Practices Study (BPS) which delivers critical financial and operational industry benchmarks to member agencies. The comprehensive publication helps agencies optimize performance and is recognized as one of the industry’s most valuable information resources.
Of the 2,600 independent agencies nominated to participate in the annual study, 282 were designated as Best Practices agencies. These top-performing agencies’ results serve as the foundation for the 2022 Best Practices Study. One of the Critical Issues Facing Agencies in 2022 outlined in the study had to do with producer migration. Read on to learn more about how this trend is reshaping the insurance industry.
Lift-Out
Are you familiar with the term Lift-Out? If you aren’t, don’t worry. The term may be new, but the concept has been around for generations. A lift-out describes the recruiting of a producer from one firm into a new firm with the promise of enhanced economics, generally in the form of book bonuses or equity incentives
Like the Name Image Likeness (NIL) dynamics in college athletics, both are driven by the same two things: increased value on the individual rather (not the institution) and less friction in moving to the next organization. With the addition of recent macroeconomic events and industry trends, it’s easier – and more lucrative – for producers to switch teams. The well-documented surge in valuation multiples for insurance agents and brokers makes producers’ books of business more valuable as well.
From the BPS Study
Valuation multiples doubled over the last 20 years while profit margins increased by approximately 46%. As a result, the value of a top producers’ book of business grew from roughly 1.1x revenue to 3.2x revenue – a jump of over 190%.
Why Do Producers Migrate?
- Ease of movement
- Economic and valuation opportunities
- Ability to work from wherever
What Can Be Done If Competing for Talent?
- Have established and distributed producer equity plans to compete for talent
- Examine equity offerings
- Ensuring that equity and wealth accumulation opportunities are at market levels or stronger
- Communicate those opportunities to who is eligible.
What Else Can Firms Do?
According to the study, Best Practices firms should think about their key account executives and leadership personnel. The research indicated that these key contributors can also be poached by large competitors. The basic message is the same: the ability to keep and attract key talent is critical to success
What’s your take? Leave a comment.
Is our industry shifting value from agencies to producers? How can agencies compete for talent without violating agency values?
Learn more about how you can apply advanced executive strategies to improve business functions and promote company success in the CIC Insurance Company Operations course.
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