Very early in my career as an insurance producer with a commercial insurance agency, I had the opportunit
to hear a speech by the famous sales coach Roger Sitkins. Though I don’t remember everything Roger talk
ed about in his presentation, I do remember him describing something called “The Pareto Principle” and the power it held for rapid and sustained success in the insurance agency business.
In my opinion, four principles are key to continued stability, growth and success for independent insurance agenc
y owners. They include the Pareto Principle, and three corollary principles
of my own that call for saying “no” more than “yes,” understanding the value of your time, and holding a sense of optimism.
The Pareto Principle
In the early 20th century, Italian economist Vilfredo Pareto discovered that 80% of the land in Italy was owned by 20% of the population. He later learned that a
similar distribution was true throughout much of the world. From this observation, came an understanding that is t
rue in business, as well as in agriculture: 80% of one’s results come from 20% of one’s clients or customers.
Sitkins advised agents should determine their own 80/20 distribution and then find a way to assign that 80% of
customers to service people or newer producers in their agencies in order to continue building their books of business and their agencies.
I decided to take up the challenge and discovered the 80/20 rule was present in my book of business. I began a process of divesting myself of the 80% of my clien
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ts with the lowest commissions every year and found that, not only did my book of business grow, as did the agency,
but also the average commission for every account grew, as well. Those three areas of growth led to consistent double-digit growth in the agency over decades.
Consider putting the Pareto Principle in place in your agency.
First, run a commission list sorted from largest commission per account to smallest. Go down that list until you’v
e hit 80% of the income. Find someone, a younger producer, a service person or another agency to take the bottom 80%. This will free up tremendous amounts of tim
e allowing you to continue to grow your book of business or your agency at the rate that you’re accustomed to.
This prevents what many agencies experience as they grow larger, which is a falloff in their organic growth rate. Adopting
this principle does require courage as you must accept some short-term pain in order to invest in a better future.
You may want to start small with one book of business in your agency to test the theory. That said, I have never seen the Pareto Principle fail when it comes to growing the business of an insurance agency.