What data does an insurance brokerage need to measure portfolio profitability?
Short answer
To measure the profitability of its portfolio, an insurance brokerage needs to combine four blocks of data: commissions earned by policy, line and insurer; new business, renewals and cancellations; the cost of servicing each policy and each client; and, where available, claims. With them you can calculate the margin by line, insurer, branch and client, and see which part of the portfolio sustains the business and which part drains it.
Why isn’t revenue enough?
Because two policies with the same commission can leave very different margins. A policy cancelled after a few months, one that generates many service requests or one whose client complains often costs more than it brings in. And an insurer with good commissions but high cancellations or a heavy admin load can be less profitable than one with lower commissions.
What data is needed?
| Block | Data | Where it usually is |
|---|---|---|
| Revenue | Commissions by policy and premium, line, product and insurer | Management system and insurer statements |
| Portfolio | New business, renewals, cancellations and their reason, effective date | Management system |
| Clients | Policies per client, tenure, acquisition channel, branch or salesperson | Management system and CRM |
| Costs | Hours or people dedicated to each type of task, acquisition costs | Accounting and team estimates |
| Claims | Claims and their cost, when the insurer shares them | Insurers and their extranets |
Which indicators should you calculate?
- Margin by line, product and insurer: commissions minus attributable servicing cost.
- Cancellation and retention rate: what percentage of policies is lost each year and in which segments.
- Policies per client: measures cross-selling and is usually closely linked to retention.
- Average premium and commission by line, to spot products that do not pay for their servicing.
- Concentration: how much the main clients and insurers weigh in revenue.
- Acquisition cost by channel: what it costs to win a client from the sales network, the website or referrals.
- Customer lifetime value: what a client brings over the whole relationship with the brokerage.
How is servicing cost calculated?
It is the least measured part. A practical approach is to split the cost of the team across types of task (new business, amendments, claims, collections, customer service) according to the time spent on each, and allocate that cost to the policies that generate those tasks. It does not need to be exact: a reasonable estimate already shows clear differences between lines and insurers.
Which decisions does it support?
- Which products and insurers to push and which to renegotiate.
- Which clients to target with retention actions before renewal.
- Where the cross-selling opportunities are.
- Which acquisition channels pay off.
- What the portfolio is worth if a sale or succession is being considered.
Where to start
- Export policies, premiums and cancellations for the last three years from the management system.
- Standardise insurers, lines and products under a single coding.
- Calculate revenue and retention indicators first, which do not require cost estimates.
- Then add servicing cost and, if available, claims.
- Update the indicators regularly in a dashboard, not just once.
This guide is for information only and does not replace professional advice for each case.