Many people think that running an insurance firm is just as easy as selling premiums and waiting for the payments to come in. Actually, there is a lot more to it than that. Oftentimes, it involves processes that test even the mightiest business strategy. Of course, there is the accounting and collection management. But above all these management processes, measuring performance is one that should not be left out. In the operation of an insurance agency or company, knowing what yardstick to use to determine current performance is good. But learning the important insurance KPI or key performance indicators is better. Below are lists of most common and possible indicators that insurance companies should focus on.
In reality though, the KPI or key performance indicators most giant insurance firms use are not that different with those used by retailers or sales oriented companies. Basically, the nature of business of an insurance company is to sell. The difference comes with the products that are being sold. See, retailers or manufacturers sell good at a one time basis, which means, after a product is sold and consumed, the seller no longer has to deal with the customer. But with an insurance company, the lifecycle type of sales occurs. Once, an insurance policy is purchased, the company is obliged or attached to cover the cost, especially in paying the benefits of the customer.
Generally, there are six most common key performance indicators used in managing an insurance firm. First, the company must measure the number of policy sales. This is the most basic and just about the most important of all. A dip in quarterly sales is not just a historical record. It is even more like a threat for the company since a decrease in number of sold policies can imply long term wounds on company sales. So, before anything gets worse, the firm must make its move accordingly. The second KPI is to determine the ratio of policies that are renewed against the accumulated number of sold policies. Knowing this will not just give managers an idea of which policy sells more. It will also help them make changes in updating old and current customers.
The third KPI is determining the number of missed payments or lapses. It is not only the performance of the company that should be tracked here but also the contribution of the customer. Oftentimes, when neglected, due payments lead to undesirable incidents, such as foreclosure. Measuring this indicator is best done when the number is identified as a percentage of the total sold policies. The fourth KPI still has something to do with lapses, only that the indicator should fall in the first 2 years of using the policy. The fifth key performance indicator is the quota. This figure usually tells the insurance company how effective collectors, agents, and sellers are in targeting desired sales. The sixth KPI for an insurance company is identifying the total paid benefits as a percentage of the premium.
These insurance KPI or key performance indicators are just actually part of the many metrics one can use. These indicators may not be used all the time, but you should be able to get the idea by now. If the company currently has a new project, it is best that agents and managers work together to achieve good results.