Agency Benchmarking: Frequently Asked Questions
The categories in Agency Consulting Group's Composite Groups represent the standard operating statement categories for the insurance agency industry. These 31 categories represent all income and expense lines normal to insurance agency operations. Your General Ledger categories are still very useful but should be combined for management and comparison purposes.
2. Are the dollar comparisons or percentage comparisons of greater importance in Benchmarking?
The dollar comparisons in benchmarking only assures you that your agency is being compared to the proper Composite Group. The percentage comparisons help you determine whether your agency is above or below the Composite Group averages for the line of revenue or expense that you are reviewing.
3. What does it mean if my line items are above or below those of the Composite Group?
If your line items differ from the Composite Group by less than 10% (in either direction), we consider it within tolerance of the averages. If any line item deviates from the Composite Group by more than 10%, it is considered either 'Exceptional' (if the difference was better than the averages) or 'Exceeds Tolerance' (if the difference is worse than the averages).
4. Does a deviance over 10% mean that my results are better or worse than the Composite Group's?
Not necessarily - and this is the MOST IMPORTANT PART of the analysis. If your results deviate from the industry averages, it is incumbent on you to determine why it is different. The deviation may mean that you have identified an area within your operations that can be improved for enhanced profitability. But the deviation, positive or negative, could also be easily explained and a normal part of your business (not needing correction).
For instance, if your Occupancy is substantially above or below that of the Composite Group, it may mean that you occupy more space than needed for an agency your size. But it could also mean that you reside in the downtown area of a major metropolis and pay top dollar rent. On the other hand, a low occupancy cost is understood if you reside in a rural town where per square foot cost may be 1/3 that of a major metropolitan area.
The deviation, itself, is less important than WHY the deviation occurred.
5. Does having all of my indicators within tolerance mean that my agency runs well?
It does - if you are satisfied that your agency is "Average"! Most agents seek to become more profitable by distributing revenues and controlling expenses BETTER than the average agency.
6. What do I do if I do not understand the analysis or if I need help improving operations?
CALL US! The automation of the Benchmarking program has permitted us to cut the cost of the process tremendously (as can be attested to by the thousands who have submitted their data for analysis in the past). But we have built a telephone consultation into the cost to permit us to help you understand the analysis or provide you ideas of how to solve specific problems (additional consulting or on-site visits, of course, are billed separately).
7. What if my operating classifications are different than yours?
The industry has adopted our classification system as the standards. However, every agency has the right to classify their categories however they desire. For instance, many agencies still place postage costs in the general "office supplies" category. We recommend that it be split out because the importance of managing postage costs requires you to know them separately from other office supplies.
If you prefer your categories, go ahead and submit your data in accordance with your categories (i.e. postage costs in office supplies), but understand that you should combine the Composite Group's separate costs to identify their value compared to your classification system.
8. What do I do after the Benchmarking Analysis is complete?
Benchmarking does two things - it compares your agency against your Peer Group within the industry - and it forms the basis of a Self-Improvement Plan. Many agents decide that that they want to improve certain revenue distribution or expense categories to maximize profits. They incorporate these plans in their Strategic and Tactical Planning process and repeat the Benchmarking Analysis quarterly or annually to measure their progress both against their Peer Composite Group and against their own historical performance.
9. What is the Historical Agency Benchmarking Program?
Many agencies would like to see both the Composite Group Benchmark comparison and a comparison of their own agency's historical performance against the current year's performance. While we retain no identity information for most agencies that submit their data for benchmarking analysis, those agencies that participate in the Historical Agency Benchmarking Program permit us to maintain their data in a separate database. Every time we receive their data for Benchmarking Analysis, their results compare their current performance against both the Composite Group's and against their own history.
Agencies who create and implement operations improvement programs benefit from one year, three-year, five year and (when sufficient data is available) ten year Benchmarking Analysis.
The cost of the Historical Benchmarking Program has also decreased substantially. Call us (800-779-2430) for the costs of this program.
10. How do I know that my information is treated confidentially?
When your data arrives at Agency Consulting Group, Inc. we input it with the only identifier being a Reference Number (that you will have on your Analysis Form). We destroy your input document and only maintain your identity for our mailing list to remind you when it is time to Benchmark again. Our Composite Group database contains thousands of agencies' data - but no identifier of who the agency is. If you ask us about your particular results, the only way we can access your data is by the reference number (do not lose it) that you have been given.
Copyright 1999 Agency Consulting Group, Inc.