What Is the Average Retention Rate for the Insurance Industry?
Are you curious about the average retention rate for the insurance industry? You aren’t alone. In fact, I had this very same question when I first got started working with agencies. When I would ask a client—what’s your retention rate?—the answer was always: good, high, great, above average. But the interesting thing was, no one could actually tell me their retention rate. What they could share was the retention rate of their largest carrier. However, as an independent insurance agency where remarketing happens, this is not the total indicator of retention.
It got me thinking: the number one reason we love insurance is renewable revenue, but for the majority of agencies across the country, tracking retention is not something routinely practiced.
The following reasons are why we don’t track our retention rates:
- We don’t have clean accurate data
- We aren’t sure which calculation to use
- When we do run it, we don’t trust it
- There is always a reinstatement, download issue, or clean up matter we don’t get to
- We aren’t clear on when to run it to get the best information
See, it’s quite complex. The reality is, it shouldn’t be this hard to run a retention rate – but it is hard to get started.
Average Retention Rate for the Insurance Industry
I’m going to share with you the average retention rate for the insurance industry, but also share with you some items to consider:
- Industry Average: 84% (you should want to vomit if this is your retention rate AND you have a standard book)
- Top Retention Performers: 93%-95% (we have agencies routinely hitting these numbers)
- 5% increase in retention can double your profit in 5 years (do we have your attention now?)
If your retention rate is 84% and you are an independent insurance agency (not captive) with a standard book, this rate is way too low. The C students of retention should be at about 88%, and you can quickly raise that number to 90–92% with a little elbow grease.
The 95% insurance retention rate is a long-term strategy, as it takes time to retrain customers, cull the book, and develop your agency standards. As we go through this blog, we will give you and your agency our top strategies for driving retention (even our coveted renewal review calls).
How To Track Insurance Agency Retention
There are a few different schools of thought on this number. Remember, inches and centimeters still measure—you need to select the calculation that works best for you. I will weigh in here with a piece of guidance: if your data needs to be cleaned up, we would recommend that you choose the monthly retention model. It’s much easier to clean up your data for one month than 12 months.
Here are the two main ways you can calculate retention in your agency.
Rolling 12 Month Retention
In this calculation, we take 12 months of data and update your retention each and every month. This catches up any reinstatements and cleanup you may do as you correct data, and is the industry standard for retention.
In addition, you can use this calculation for retention rate by policy, premium, and/or revenue. We recommend you review all three, as they each can tell a different story. The only downside to this model is if you have a great deal of data to clean up or you start really focusing in on retention, this model can be clunky.
Due to the 12-month nature of this calculation, any efforts toward retention may not show impact for 6+ months, as the data set is quite large.
Note: For the calculation we will use policies. However, you can use the same calculation for premium and revenue, just substitute the data.
[(Total Policies in Force)-(Lost Policies)]/[(Total Policies In Force + Lost Policies)-New Business]
Monthly Retention
In this calculation, we take one month of data and update your retention each and every month. To use this method, you will want to close the month like you do for accounting. When you close the month, you will have confidence that you have received all downloads for the previous month, reinstatements, and cleaned up any remarkets in your management system.
You can use this calculation for retention rate by policy, premium, and/or revenue. We recommend you review all three, as they each can tell a different story. The only downside to this model is that if a policy reinstates or you miss some cleanup after you close the month, you may have inaccurate data. The plus side is you can see any work you are putting into retention much faster to gain confidence in your actions.
Note: For the calculation we will use policies. However, you can use the same calculation for premium and revenue, just substitute the data.
[(Total Policies in Force)-(Lost Policies)]/Total Policies In Force
Managing Rewrites In Your Management System
In order to get accurate retention rates, your agency must use your system’s recommended workflows for managing rewrites. The challenge with rewrites is that the previous carrier downloads a cancellation into your agency management system. The new carrier also downloads the new policy as new business (hint: if you aren’t paying attention to this and you pay agents a higher commission rate on new business than renewal business, you may be overpaying your team).
It is industry best practice to clean up this information. You may want to use a VA or support person to review and update your system monthly. Alternatively, the best practice is to set a future task to confirm you received the new policy and the past policy cancellation. Once that has taken place, you update your system. For more information, you can check out our Agency Remarketing Process Pack.
In addition, in our Agency Retention Program we also go into detail on this, as well as provide guidance on each system and how to obtain this data clean and clear. In fact, we create great data dashboards for review each week for our clients.
How Can Independent Insurance Agents Increase Their Agency Retention?
I absolutely love answering this question. As a believer in strong retention, we have developed several short- and long-term strategies so agencies can be retention masters. We will share with you our top strategies so your agency can start being above the average retention rate for the insurance industry.
Short-Term Insurance Retention Strategies
By using these strategies, you should be able to stop the bleeding at your agency. Think of this like an EMT or ER doctor — they will have instant impact, but to truly get healthy, you will also need to commit to the long-term strategies for success.
Plan to Stop A Call In Cancellation
When someone calls in, what is the plan to stop them from cancelling? Above-average retention insurance agencies have a clear plan that is trained on—to take a deflection and turn it into a lifelong customer.
Too many agents think that when coverage has been bound elsewhere, there is no hope. We take a bit of a different approach. We believe there is still a great deal of opportunity.
You need a clear script, a plan, and to send them to the best person in the agency to get the client to stay.
If you want more details, check out our How to Stop a Cancellation Process Pack for the exact way to save a client.
Agency Standards
We help agencies build a document list of standards. It’s very common for agencies to feel that because a carrier allows something, the agency should do it. Example: we have a carrier that will write a risk, so we should write it — wrong! Instead, we need a list of standards that every agency uses to provide the best service to the right clientele.
Our standards include:
- Minimum limits
- Number of claims before the agency non-renews it
- Number of lapses before an agency mandates pay-in-full or EFT
- Email and call response time
- New business payment protocol
- And more — for more details check out our Agency Retention Program
Filtering out the clients that hold back your retention helps you work above the average retention rate for the industry!
WOW Customer Service
Insurance is still a people game. We train our people on transactions but not how to lead, guide, and handle customers. The top agencies aren’t just transacting service requests, they are really connecting and guiding clients.
When you have an undertrained team, you end up having to put out fires all day long. No one has time for that. Instead, your team needs training on how to be an agent and educate your clients on why they need coverage over cheap insurance.
You can check out our WOW Customer service training for more details.
Long Term Insurance Retention Strategies
Once you stop the bleeding, you can now work to really rev up your retention. These next strategies focus on long-term approaches that will slowly but surely increase your retention.
Sell on Value
Yes, that is right – it all starts at the point of sale. If you sell on price, you will most certainly have to service on price. We won’t always be the cheapest (and we shouldn’t want to be!). So, when a client is only with us due to price, it’s a hard retention game. Instead, your agency needs to have a value proposition and a list of why to do business with your team. It needs to be clear as day what you do other than beat the street on price.
Our Agency Growth Program can help your sales team do just that!
Client Nurturing
Have you heard the old saying “The squeaky wheel gets the grease”? Well, it’s also very common in insurance.
We spend most of our time on the neediest clients.
You need to ensure you are email marketing—and marketing in general also includes marketing to your current customers. A simple Happy Labor Day email or tips and tricks keep your name in front of the insureds. If they don’t remember you, they can’t refer you or call you when there are challenges—instead, they will leave and shop!
In insurance, we have so many options to help nurture your clients today. Make sure you have systems and tools to keep your name in front of your customers.
Metrics and Incentives
As we discussed earlier, obtaining retention rates can be challenging. You won’t know if you are above the average retention rate for the insurance industry if you can’t track it. However, your team can’t do better if they don’t know the numbers. If your team doesn’t have access to, and/or there are no meetings to review the metrics, then they don’t have the opportunity to understand how they can do better.
In addition, too many agencies actually incentivize people just for new business. Well, if I was making money on new business, that is exactly what I would prioritize. Instead, you can incentivize the team on book growth. We cover this in our Agency Retention Program.
Renewal Reviews
The best way to boost retention for the long run is to make proactive renewal reviews. This means calling every client one time per year to proactively review their coverage. It’s a hard program in the beginning, but it gets easier after about 60 days, and then you get the following benefits:
- Better contact information
- Reduced E&O concerns
- Coverage increases
- Cross sells
- Referrals
- Boosted retention
- Less inbound frustrated client calls
- Increased confidence in claims and more…
Your agency can do it, but you may need some help. That’s why we created our Agency Retention Program.
Conclusion
In conclusion, understanding and improving retention rates in the insurance industry is critical for agencies aiming to thrive in a competitive market. With an industry average retention rate of 84%, independent agencies must strive for higher benchmarks, targeting 90–95% through strategic short-term and long-term initiatives.
By addressing challenges such as inaccurate data, inconsistent tracking methods, and mismanaged rewrites, agencies can lay a foundation for success. Implementing robust agency standards, delivering exceptional customer service, and fostering proactive client engagement through renewal reviews and value-based selling are essential steps toward surpassing the industry average.
By leveraging these strategies and utilizing resources like the Agency Retention Program, independent insurance agencies can not only boost retention but also enhance profitability, client satisfaction, and long-term growth.
🔥 Check Out Our Latest Blog: Is Your Agency Above the Average Retention Rate for Insurance Industry?
🎉 Get Your FREE Agency Retention Express Mini Renewal Review Form & Scripts
🚀 Introducing Agency Retention
📈 Ready to Take Your Agency to the Next Level? Book a Meeting with Agency Performance Partners for Tailored Strategies That Drive Real Success. Schedule Your Consultation Today! Book Now
🤝 We’re Agency Performance Partners; APP is your insurance agency’s best friend when it comes to training, strategies, brutal truth & tough love that’ll grow your agency with hugs & high fives along the way….just like a BFF. LEARN MORE
🎙️ Stay in the loop! Subscribe to our podcast and be the first to catch every new episode packed with fresh insights and tips!
🌟 Be a Retention Rockstar 🎸 and rock our exclusive swag shirt 👕 with pride!
