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NOW UPDATED FOR 2006!
The most recent benchmarking data for Insurance Brokers is now available, both in print and in downloadable PDF format, with your purchase of the Insurance Brokers Business Benchmarking Guide. (NOTE: 2006 updates not yet available in online HTML subscription version of this guide - please call MAUS Sales Centre on 1 300 300 586 for further info.)
This Small Business Profile presents the results of a survey of Insurance Brokers for the financial years up to June 30, 2004. The survey was based on 45 businesses.
One of the key factors to get right in this industry is the mix of people. The power of the principals and the employed brokers/consultants can be multiplied with the right support, people to arrange the paperwork and sometimes to get the leads too.
This way, the consultants can select the right products and policies for each client's needs. So staff mix is important and that drives a salary cost. Other overheads can be kept under control and economies of scale can also help to keep them low as percentages of revenue.
Survey Results
These are the results of a survey of insurance brokers. These results should not be considered to be representative of all insurance brokers in Australia. However, they will allow business owners to identify strengths and weaknesses in the ability of their business to generate revenue, control expenses and earn sufficient profits. This is done by identifying these elements of business performance and comparing them with benchmark performance levels currently being achieved by the sample of businesses in this survey.
Most of the insurance brokers participating in the survey were from the eastern states of Australia. Queensland was the most heavily represented area, while there were no firms located in Tasmania or the Northern Territory in our sample.
Around 47% of the representation in the survey was from Capital City/Suburban/Major Regional City locations with another 26% of firms from large regional cities and towns (population over 20,000). The remaining businesses were located in rural areas.
Around 76% of participating businesses rented their premises and approximately 46% of those firms which rented were located in premises with street frontage.
The following table will give you a snapshot of the variance in results found in your industry for various Key Performance Indicators (KPIs). Each KPI (shown in rows) should be considered independently of each other. For example, a business with a high percentage gross profit would not normally also have a high relative percentage of their income spent on wages.
For each KPI, the table shows the average, high and low results found in the business surveyed. The KPIs should not be 'added together' under the high and low columns as they do not necessarily relate to the same business.
The KPIs show the 4th highest and 4th lowest actual result for each performance indicator. The range of values shown therefore covers the middle 80% of reported results.
| Indicator | Average | Low | High |
|---|
| Total Commission and Other Income | $480,485 | $125,147 | $1.096m | | Wages & Salaries (staff only, not
owners) | 26.34% | 12.49% | 38.66% | | Rent of Premises# | 4.90% | 2.99% | 8.84% | | Staff on Costs | 3.33% | 1.13% | 5.94% | | Telephone, fax, etc | 3.40% | 1.67% | 4.75% | | Vehicle Operating Expenses | 3.69% | 0.00% | 10.14% | | All Other Expenses | 4.28% | 1.13% | 8.17% | | Net Profit (bps)* | 40.06% | 24.18% | 57.36% | | Total Income per Person | $82,747 | $50,858 | $116,954 | | Support Staff per Consultant including Consultant Principals | 1.03 | 0.26 | 2.00 | | Employed Consultants per Licensed Principal | 1.11 | 0.00 | 3.00 | | Floor Area per Person (square metres) | 25 | 12 | 40 |
# calculation excludes any firm in freehold premises
*(bps) before principals' salaries and benefits
So, how does your firm 'stack up' against these averages? These results will give you an idea of where your business falls in relation to the sample and give you a better understanding of your relative strengths and weaknesses.
The remaining expense items each represented less than 3% of total income on average; however some businesses reported some larger results for such items as:
- Advertising and Promotion (including Group or Franchise Fees) of up to 5.01%;
- Insurance of up to 6.47%;
- Interest, Bank Charges etc of up to 12.29%;
- Printing, Postage and Stationery of up to 5.85%;
- Other Occupancy Costs of up to 2.22%;
- Other Depreciation, Lease and Hire Purchase of up to 4.49%.
To summarise this, larger businesses had:
- Higher net profit per principal;
- Better productivity per consultant and per person;
- Slightly more principals, with the bulk of the extra revenue being serviced through more employees;
- The highest ratio of support staff to consultants, and more employed consultants per principal;
- A relatively larger asset base, leading to lower asset turnover results.
The more profitable businesses:
- Were larger on average;
- Had a personnel structure where the principals formed a smaller percentage of the total personnel, but those principals had to work more hours per year to compensate;
- Had higher personnel productivity;
- Had lower asset turnover, indicating either apos;moreapos; assets or less-efficient use of those assets.
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