Do you want to know how much money insurance agencies make yearly? If YES, here are 7 factors that determine the income & profit margin of insurance agencies. An insurance broker sells, solicits, or negotiates insurance for compensation; they make money off commissions from selling insurance to individuals or businesses.

Insurance brokers play a significant role in helping companies and individuals procure property and casualty (liability) insurance, life insurance and annuities, and accident and health insurance. Research shows that brokers play a significant role in helping small employers find health insurance, particularly in more competitive markets. Average small group commissions range from two percent to eight percent of premiums.

So, with that in mind, we can estimate what an insurance agency business or better still insurance brokerage agency is expected to make, but it is important to point out that there is no one-mold-fits-all when it comes to how much an insurance agency business is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average insurance agency business makes yearly and these factors are;

7 Factors That Determine How Much Money Do Insurance Agencies Make Yearly

1. The Size of the Insurance Agency

One cannot conveniently state the amount an insurance agency business is expected to make yearly if you do not know the size of the business. You cannot equate the amount an insurance agency business that is just starting out with a well – established insurance brokerage agency business that offers robust services and operates from a standard office facility with dozens of workers and a robust business network.

2. The Location the Insurance Brokerage Agency is Covering

A key factor that can greatly influence the money an insurance brokerage agency business is expected to make is if he chooses to operate in a location where people and businesses that can afford their service. The truth is that, you will struggle to make good money as an insurance brokerage agency business if you locate the business in an area filled with low income earners or in a ghetto.

3. The Type of Insurance Policy Retailed and Complimentary Services Offered By The Agency

Another important factor that will determine how much an insurance brokerage agency business is expected to make yearly is the type of insurance policy covers retailed and other complimentary services offered by the business. You will agree that the money an insurance brokerage agency business that work with all the available insurance companies in the United States and also sell a wide range of insurance policy covers will be far larger than what an insurance agency business with limited policy covers.

Please note that the primary way an insurance broker earns money is commissions and fees based on insurance policies sold. These commissions are typically a percentage based on the amount of annual premium the policy is sold for. In addition to connecting clients to the right policy, the broker continues to have obligations to his clients.

The broker provides consulting services to help determine whether policies should be changed, provide assistance with compliance, and help with submitting claims and receiving benefits. In essence, a standard insurance brokerage agency that offer other complimentary services will sure make greater profit margin since they are going to be fixing the price of their services without recourse to a regulating body.

4. The Management Style of the Insurance Brokerage Agency Business

Another key factor that will determine the amount an insurance brokerage agency is expected to make yearly is the management style of the agency. Trust me, the results you will get when you are good manager will definitely be different from what a mediocre or bad manager will make. The idea is that a good manager will not just retain their old customers, they will also keep getting new customers especially through recommendations.

5. The Business Approach of the Insurance Brokerage Agency Business

There are different business approaches that an insurance brokerage agency business can choose from and no doubt it will greatly influence the amount they are expected to make monthly and yearly. Of course, we know that insurance brokerage agency business may decide that they want to work alone and do their marketing alone and also an insurance brokerage agency business may decide to partner with other businesses that will recommend clients to them.

It is easier to find insurance brokerage businesses that offer robust services partnering with startups, licensing offices and other agencies that will recommend clients to them. In essence, a well – organized insurance brokerage agency business that works with others will surely make more money than a solo insurance brokerage agency.

6. The Advertising and Marketing Strategies Adopted by the Insurance Brokerage Agency Business

Another key factor that will determine the amount an insurance brokerage agency business can make yearly is the advertising and marketing strategies adopted by the agency. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.

But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect an insurance brokerage agency business that is engaging in aggressive advertising and marketing to make same amount yearly with an insurance brokerage agency business that is passive with its advertising and marketing.

7. The Number of Years the Insurance Brokerage Agency is in Business

Yet another key factor that will determine the amount an insurance brokerage agency business is expected to make on a yearly basis is the number of years the insurance brokerage agency is in the industry. In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is well – managed and creativity as it relates to marketing and sales always come to bear.

For example, in your first fiscal year (FY1) you might make two hundred and fifty thousand dollars ($250,000), in your second fiscal year (FY2) you might make four hundred and fifty thousand dollars ($450,000) and in your third fiscal year (FY3) you might make six hundred and fifty thousand dollars ($650,000).

Estimated Profit Margin for an Insurance Brokerage Agency

In order to calculate the profit margin for an insurance broker, you should know that the primary way an insurance broker earns money is commissions and fees based on insurance policies sold. These commissions are typically a percentage based on the amount of annual premium the policy is sold for.

An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, life, and others. An insurance broker makes money off commissions from selling insurance to individuals or businesses and most the commissions they make are between 2 and 8 percent of premiums, depending on state regulations.

We are not ruling the fact that an insurance broker or agent usually earn a lump sum percentage from the first year premium of a policy that they sell to a client, and then a smaller but ongoing annual residual income payment over the life of the policy. The profit margin of an insurance brokerage agency varies greatly hence there is no fixed figure to it.