Navigating the maze of brokerage data to find pots of gold

When British mathematician Clive Humby said in 2006, “Data is the new oil,” he might not have realized just how applicable that statement would be to the insurance industry’s growth and profitability 19 years later.

Humby’s quote has been interpreted to mean data will surpass oil as the driver of the global economy. Whether that ultimately proves to be the case is unimportant; comparing data and oil is apt. The value and usefulness of both depend on how they are processed and applied.

Insurance agents and brokers have a complex myriad of data at their fingertips, and maximizing the value of it all is challenging. There is, however, an area where they can tap significant revenue opportunities with minimal effort: placement data.

Insurance intermediaries collect vast quantities of data every day related to placing coverage, not only on their customers’ risks but also from the insurance companies that accept those risks. This data can serve as a roadmap to consistent financial outperformance, if brokers can unlock it.

Even though placement data reflects potential revenue, brokers can’t realize those earnings until they connect the dots between client need and carrier appetite, and they complete coverage placements. What’s needed is a reliable way to speed up that process.

Accelerating placements

Accelerating the placement process and making it more efficient is an opportunity for every agent and broker. Beyond speed, maximizing the value of placement data means gaining clear visibility into opportunities that drive growth.

Identifying growth opportunities in placement data is a bit like matchmaking. Brokers must consider: What coverages do insureds need? What are underwriters looking for? Where do insurers have an appetite to write more business? By bringing both sides together with agreeable terms, the intermediary fulfills its mission and forges relationships that can deliver long-term benefit to all parties.

Imagine how much faster a broker could achieve revenue goals by analyzing placement data and finding opportunities it didn’t see before. What could happen when a broker sees the possibility of offering additional coverage to an existing customer, or consolidating multiple lines with an insurer that is paying more commission for that business? Growth and profitability could increase for the brokerage, while the client gets more protection for its risks.

Consider the following hypothetical – though common – scenario:

ABC Insurance Brokers serves a wide range of midsize and large clients by procuring property and liability insurance policies. Even though ABC has placed its clients’ risks with more than 50 different insurance companies, 80% of its book of business is placed with just 10 carriers. A great deal of time and effort is expended maintaining relationships with 40 insurers that account for a fraction of ABC’s clients. In addition, of the 10 core insurers, five generate more than 60% of ABC’s commission income. Seeing this, it becomes clear to ABC that the brokerage can generate more income by consolidating placements with fewer insurers, where doing so makes sense for the clients.

Moving up the ranks

A 2024 MarshBerry analysis of U.S. brokers shows the largest 50 firms account for 96% of the revenue of the top 100, while the bottom 50 have only a 4% share. With mergers and acquisitions forming a key building block of growth for most brokers, achieving organic growth through better use of placement data is a highly cost-efficient alternative – or supplement – to M&A.

The five-year compound annual growth rates (CAGR) for brokers in the top 100 varies by revenue size, MarshBerry found. Average five-year CAGR for brokers ranked 11-50 in 2023 was 17.6%, while it dropped 9.5% for those ranked 51-75. The brokers ranked 76-100 had the lowest average CAGR, at 4.7%. This shows how smaller brokers struggle to consistently achieve growth.

Privately held brokers pursue growth to meet different objectives. Some prefer to remain independent, while others look to maximize their appeal for sale to a larger firm or private equity buyer. In either case, better use of placement data is a key to achieving sustainable, consistent growth.

Sharpening the line of sight

Gaining insight into the revenue opportunities within placement data is difficult with existing agency management systems. Those platforms excel at supporting agents’ and brokers’ workflows, but they fall short in providing strategic insights about placement. Innovative technology, such as Broker Insights Vision^TM, now exists that works hand-in-glove with brokers’ existing core systems to analyze placement data and bring growth opportunities to the fore.