Brokers turn lax in hard market: pure organic growth up a mere 3.2%
Insurance brokers only squeezed out 3.2% organic growth in 2023 above and beyond what rate and exposure growth delivered on their own on a very split market where top performers still managed double-digit cleaned growth while others sat ‘complacent,’, analysts at MarshBerry contend after a review of 2023 earnings.
“Organic growth is a deceiving, slippery slope,” MarshBerry analysts said of industry satisfaction with organic growth rates during the hard market when inflation further boosted insured valuations.
Gross organic growth of 10.2% for insurance brokerages in 2023 included seven percentage points from premium rate increases and exposure base growth in the existing book of business, leaving the 3.% cleaned growth rate. With commissions on new business at 14.3% of prior year commission totals, MarshBerry estimates leakage from the system at 4.1%.
Variation amongst brokers appears high, rendering not only an outperformer class that can achieve double digit cleaned organic growth, but suggesting a larger underperformer class “naïvely sitting complacent.”
The top quartile amongst brokers by performance reported organic growth at an average level of 18.7%, or a cleaned rate of 11.7%, MarshBerry calculations show.
Strong new business sales were suggested by commissions on new business at a much higher 23.3% of prior year commission totals against a still-controlled 4.6% leakage rate, MarshBerry said of what it considered “meaningful, sustainable, organic growth achieved by superior new business production and retention.”
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