Agency Performance Partners


What Is Insurance Retention and Why It Matters

Posted on May 6, 2024 by Kelly Donahue Piro

I. Introduction: What Is Insurance Retention?

As we look at the insurance industry you may be thinking -what is insurance retention and why is it so important? Insurance retention is one of the best parts of this industry. 

Every year and can pretty much guarantee that 90% of your revenue will be there this year. Not too many industries have renewable income! But insurance has recurring revenue. 

What is even better is that if your agency focuses on growth (new business and retention at the same time) you have a recipe for a strong and stable business. 

For many years in insurance there was a debate: Are you a service agency or sales agency?

  • Service Agency: Service is the name of the game, limited producers, marketing and a focus on customer care. They prioritize taking care of a current customer over acquiring a new one. 
  • Sales Agency: Producers, leads, marketing and recognition is based on ability to sell new policies. They prioritize a new lead over a current customer. 

May 2024 Insurance Renewal Philosophies Flyers

Now there is no right or wrong way. Clearly both of these models have gaps. You won’t retain every one and you will need to replace lost customers. You also can’t run a business model where you sell one to lose one. For this reason we believe agencies need to focus on growth. 

Here are some key identifiers of a growth agency:

  • They have growth goals (not just new business or retention but total book growth)
  • They separate new business and service (but service people do cross sell and have growth goals from existing customers
  • Marketing is to existing customer and new business
  • Referrals run the show everyone is focused on generating opportunity from the book
  • There is a focus on high quality new business
  • There is a documented customer experience
  • The team is rewarded based on agency growth not just new or lost

For this blog we will be focused on what is retention and how we recommend your agency drives the highest retention rate. 

3 Minute Video: Retention For Insurance Policies: 3 Steps to Take Right Now

What is Insurance Retention?

Insurance retention can be defined in the following buckets:

  • Number of policies retained
  • Premium retained
  • Revenue retained

We recommend agencies look at all three of these numbers. However, there is only one you can take to the bank and that is revenue retained. You can’t take your policy count and make payroll. 

Insurance retention is a calculation you can run in your management system or in Excel that identifies the number of (policies, amount of revenue, amount of premium) that was expiring in date range and how much did the agency retain?

How To Calculate Retention

This is one report that tends to frustrate insurance agency owners. In your management system you have to be running very specific procedures in order to make these reports usable and accurate. One of the most common factors that can reduce the accuracy of your reporting is your remarketing/rewrite process. 

What happens in many systems is download codes the previous policy was canceled – but it’s actually replaced. The replacement policy downloads as new business (because it’s new to that carrier) and inflates your new business. 

Every management system has a procedure for how to either update this before the download or clean it up post download. In order to track your retention we recommend you contact your management system to understand the right process for your management system to track insurance retention. 

When we work with agencies we also often find several gaps and holes in their data. We find policies with $0 premium and $0 revenue. When you look at your retention reporting you will want to clean up these fields to ensure you are getting the right data the first time. 

Calculating Insurance Retention Monthly

If your data needs to be cleaned up we recommend this model. In addition, if you have retention concerns, looking at the monthly number will show you the reality quickly. Our second option looks at 12 months worth of data so increases or decreases may look small but add up over time.

 Here is how you calculate monthly retention:

  • # of policies, amount of premium or revenue expiring in that month
  • # of policies, amount of premium or revenue that canceled that month

Formula: Canceled/Expiring = monthly retention rate

Now, one item to note here is we are taking anyone canceling that month – regardless of their expiration date as some clients do cancel mid term. We also recommend that you run the canceled policies around the 10th of the month for the previous month to allow final downloads to come through and for your team to clean up the data. 

Calculating Insurance Retention Over a Rolling 12 Months

When you have good faith in your data this is the most accurate way to report. The reason it is preferred is that some policies may come and go. People may reinstate or come back with a lapse (although we hope you don’t have too many of those). 

Here is how you would run and calculate 12 month rolling retention rate:

  • # of policies, amount of premium or revenue expiring for the last 12 months
  • # of policies, amount of premium or revenue that canceled for the last 12 months
  • # of policies, amount of premium or revenue of new business for the last 12 months 

Formula:  (# of policies, amount of premium or revenue expiring for the last 12 months – # of policies, amount of premium or revenue of new business for the last 12 months)/ [(# of policies, amount of premium or revenue expiring for the last 12 months + # of policies, amount of premium or revenue that canceled for the last 12 months) – # of policies, amount of premium or revenue of new business for the last 12 months ]

Since this is a little tricky let me breakdown an example:

  • # of policies, amount of premium or revenue expiring for the last 12 months = 100 Policies
  • # of policies, amount of premium or revenue that canceled for the last 12 months = 10 Policies
  • # of policies, amount of premium or revenue of new business for the last 12 months = 20 Policies

(100-20)/((100+10) – 20) = 88% Retention

Now you can see why it is so critical and important that your new business and cancellation is clean. Provide your team the right process and hold them accountable so you can track a critical metric in your agency. 

Why Is Insurance Retention – The Metrics Behind It

To help provide you some context on why insurance retention is so critical let me share with you some statistics on how impactful a strong retention rate can have on your agency. 

  • The average retention rate in the industry is 84%
  • Top agencies are at 93%-95%
  • A 5% improvement in retention for 5 years will double your agency profit
  • 65% of clients who leave an agency never speak to an agent before they left
  • 80% of people who spoke with an agent this year stay
  • Only 13% of your book is truly loyal
  • 28% of people start shopping due to perceived poor service

When you have to determine what to invest into retention – it pretty much is guaranteed to pay you back. So why do so few agencies embrace proactive renewal reviews or marketing to their current customers? The reality is that the retention game really is a training game. 

One of the biggest reasons clients leave an agency is indifference. They don’t feel love. 

Running a high level retention strategy does require people. It’s not something you can buy or automate (yet) in the independent insurance channel. 

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What it does take is the following:

  • Training your team and holding them accountable to giving WOW customer service
  • You need to train your team on how to stop a cancellation
  • Your agency needs agency standards what policies to write and what the requirements are
  • You need to nurture your clients with text, email, mail and phone calls
  • We need to track retention and share it with the team
  • The team needs incentives around agency growth
  • You have to make proactive renewal reviews to every client annually

Challenges Agencies Face In Insurance Retention

Retaining client’s isn’t simple or easy. However, it is doable. The big challenge is you need a consistent approach to retention. The bottom line is hope can’t be your retention strategy. Here are the top challenges we see agents facing in regards to retention. 

Over or Under Use of Technology to Fuel Retention

This one may seem a bit odd. Maybe we need goldilocks?

In some agencies we walk into, the agency is worried their team can’t handle a consistent approach so they want to automate all touch points. This is a challenge simply because people tune out automated emails, text and phone calls. You can automate part of retention but not all of it. 

Next, the agencies that under use technology so the renewal process is so very cumbersome. You want to automate reports, some touch points and alerts for sure. So if your agency is doing everything manually you can’t survive that way either. 

You need a middle ground of some of each!

Customer Service Is Not Measured

I remember going to an agency and asking the owner what they wanted. He said I want to feel happy here. When I ask many agents what their retention rate is, the answer is HIGH! 

When I ask how your customer service is, the response is GOOD! The problem is these are feelings and not metrics. You need to survey your customers and ask clients what you can improve. 

Know that your team is WOWing your clients don’t assume. 

May 2024 Insurance Retention Process

Your Team Focuses On Price Too Much

I don’t know any other industry where I can talk about how I feel about price as much as we do in insurance. We live in the feelings about insurance costs. 

Then we apologize! We didn’t do anything wrong – the rate is the rate. We all need to train our teams how to have this conversation. When we get good, comfortable and confident talking about rate and increases – your agency wins. 

So the question is have you trained your team and provided them scripts? If not, you may need to talk to us. 

3 Minute Video: Insurance Agency Client Retention:  Agency Standards

We Are Apathetic About People Who Want to Leave

Let’s think about this. When a client leaves if you don’t have the right incentive plan – it’s less work for your team. Now, too many losses means a bad situation but when you’re tired, burned out and unclear on the mission it’s easy to let someone leave without a fight. You can see how easily this can happen at any agency. 

Now in the majority of agencies the account manager handles people who want to leave. However, is that the best plan? 

The person may have an issue with the account manager so should it go to someone else? In addition many account managers have a fear of being too pushy – well the client is breaking up with us we may need to at least be assertive!

To help empower your team do you have a cancellation process. How easy should it be to leave your agency? 

You can ask the client for a copy of their policy or have them speak to a specific individual. We don’t have to use the order taking mentality on policy cancellation. Identify your agency’s process that you need, not just what the carrier wants. 


In this blog we reviewed what insurance retention is and why it matters to you, your team and your bottom line. Your agency needs a specific retention strategy that is an agency wide initiative. 

This strategy has to be a combination of training, scripts and strategy. When you train your team on how you approach retention they can get really great at keeping clients on the books. Lastly, you want to make sure your team is confident in delivering wow service and renewal reviews. Remember neither of these are optional.

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