Today I was reading through the 2007 annual report of Tower Group (TWGP), an insurance company, and when I got the description of their distribution methods and results, this is what they had to say:
We generate business through independent wholesale and retail agents and brokers, whom we refer to collectively as producers. These producers sell policies for us as well as for other insurance companies. In addition, we have agreements with general agencies that provide full service binding authority programs. We had 931 producers and general agents appointed to generate business in 2007.
As of December 31, 2007, approximately 76% of the 2007 gross premiums written and produced by TRM on behalf of its issuing companies, were produced by our top 172 producers representing 18% of our active agents, brokers and general agencies. These producers have annual written premiums of $550,000 or more. As we build a broader territorial base, the number of producers with significant premium volume with Tower is increasing. In 2006, producers with premium volume of $500,000 or more numbered 121 and contributed 77% of gross premiums written.
I just felt this was a spot-on, real-world illustration of the 80-20 rule, which states that roughly 80% of the effects come from 20% of the causes.
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