How Retention Rate is Misleading Your Agency

One of the things I see all the time when it comes to agency marketing and agency health is a reliance on the blanket retention rate. A high retention rate is good, while a low retention rate is bad. Some agencies understand that they will have a low retention rate due to their clientele and have modified their business plans and pricing accordingly. However, the vast majority of agencies will live or die based on their retention rates.
While speaking to a particular agency, I asked, “What is your retention rate?” They proudly stated, “Roughly 85%.” Never mind that the principal did not know the exact number (a carrier offered his retention of their customers), a retention rate of 85% is a decent number. However, this retention rate is misleading the agent into thinking all is well with his agency. When I asked a few more questions looking at a three-year sample of the agency, the following picture unfolded.

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