Key takeaways
- Cost per lead tells you what a lead costs. Cost per bound policy and return on spend tell you whether it was worth buying.
- A cheaper lead source can lose money while a more expensive one pays for itself several times over.
- Track every dollar, including lump-sum spend like monthly ad budgets and email blasts, not just per-lead purchases.
- Measure return against commission actually earned, and allow time for policies to bind and chargebacks to settle before judging a source.
- Review sources on a regular schedule and move budget toward the ones that bind business.
Most agents know what their leads cost. Far fewer know which lead sources actually make them money. A vendor selling leads at $15 can quietly lose money while one charging $25 pays for itself several times over, and the only way to tell them apart is to follow every dollar through to the policies it produced. This guide walks through the numbers that matter, how to calculate them, and how to decide where your next dollar goes.
Why cost per lead is the wrong scoreboard
Cost per lead is easy to measure because the vendor hands it to you on the invoice. It is also the least useful number in your marketing. It tells you what you paid to get a name and a phone number. It says nothing about whether that person bought a policy.
Two sources with the same cost per lead can produce very different results. One might send people actively shopping for coverage, while the other sends people who filled out a form for something else. The difference only shows up further down the line, in quotes, policies and commission.
The numbers that actually matter
Track these for every lead source:
- Total spend. Everything you paid the source, including per-lead charges and any lump-sum costs.
- Leads received. How many leads the source delivered.
- Contacted. How many you actually reached.
- Quoted. How many received a quote.
- Policies bound. How many became written business.
- Commission earned. What those policies paid you, net of chargebacks.
From those, three numbers do most of the work:
- Cost per lead = total spend ÷ leads received
- Cost per bound policy = total spend ÷ policies bound
- Return on spend = (commission earned − total spend) ÷ total spend
A worked example
Here is a hypothetical month across three sources. The figures are illustrative only, to show how the math works.
| Source | Spend | Leads | Cost per lead | Policies bound | Cost per bound policy | Commission earned | Return |
|---|---|---|---|---|---|---|---|
| Source A | $1,500 | 60 | $25 | 6 | $250 | $4,200 | 180% |
| Source B | $1,200 | 80 | $15 | 3 | $400 | $1,800 | 50% |
| Email blast | $900 | 45 | $20 | 0 | — | $0 | −100% |
Judged on cost per lead, Source B looks like the best buy. Judged on what it produced, Source A returned more than three times as much on every dollar. The email blast has not bound anything yet, which is worth knowing before the next one goes out.
None of this means Source B should be cut. A 50% return is still a return. It means that if you have one more dollar to spend, the numbers point toward Source A.
Track every dollar, not just per-lead purchases
Per-lead purchases are the easy part. The spend that gets missed is the lump-sum kind:
- Monthly ad budgets on social media or search
- Lead packages bought in bulk
- Email or direct mail campaigns
- Event or sponsorship costs
If those costs are not tied to a source, the leads they produce look free, and the source looks far better than it is. Record lump-sum spend against the campaign or source it paid for, for the period it covered.
Measure against commission you actually earned
Premium written is a useful number, but it is not what you take home. Return on a lead source should be measured against commission earned on the policies it produced.
Two things are worth keeping in mind:
- Chargebacks. If a policy lapses early and commission is charged back, the source's return should reflect that. A source that binds plenty of business that does not stick is less valuable than it first appears.
- Timing. Leads take time to work, quote and bind, and commission follows later. Judging a source in its first week will undercount what it produces. Give each source enough time to show real results before deciding.
Watch where leads stall
When a source underperforms, the stage where leads drop off tells you why.
- Few contacted. Bad contact information, or leads that were not expecting a call. Speed to first contact also matters here.
- Contacted but not quoted. The leads may not be a fit for what you sell.
- Quoted but not bound. Pricing, product fit or follow-up may be the issue.
Compare the same stages across sources. If every source stalls at the same point, the issue is probably in your process rather than the leads.
Make it a routine
Lead source performance changes. Vendors change their sourcing, campaigns wear out and seasons shift. A simple routine keeps your budget pointed in the right direction:
- Monthly: record spend and review leads, contact rate and quotes by source.
- Quarterly: review policies bound, commission earned and return by source.
- Each review: move some budget from the weakest performers toward the strongest, and give new sources a fair trial before judging them.
Where simpleAMS fits
simpleAMS includes a Lead ROI dashboard inside the Leads module, with every agency tier and subscription plan. You record a cost on each purchased lead, and add lump-sum campaign spend for things like monthly ad budgets, lead packages and email blasts.
The dashboard follows those leads through contacted, quoted, converted and policies bound, along with premium written. It shows cost per lead, cost per bound policy, commission earned and ROI for each source. Plain-English insights point out your top performing source, the ones losing money, and any spend that has not bound anything yet.
Because the leads, policies and commission all live in the same system, there is no spreadsheet to keep in sync. The numbers come from the work you are already doing.
This article is general information, not financial advice. The figures in the example are hypothetical and for illustration only.
Frequently asked questions
What is a good cost per lead for insurance?
There is no single right number. It depends on the product, the lead type and how well you work the leads. A more useful question is what each source costs per bound policy, and whether the commission on those policies covers the spend.
How do I calculate ROI on a lead source?
Subtract what you spent on the source from the commission earned on policies it produced, then divide by what you spent. For example, $1,500 spent and $4,200 earned is a return of 180%.
How long should I test a lead source before judging it?
Long enough for leads to be worked, quoted and bound, and for early chargebacks to show up. For many agents that means at least one to three months of consistent follow-up, depending on the product and sales cycle.
Should I count leads that never bought anything?
Yes. Every lead you paid for is part of the source's cost. Dropping the ones that went nowhere makes a source look better than it is.
What if a source produces a lot of quotes but few policies?
Look at where the leads stall. A gap between quoted and bound can point to lead quality, product fit or follow-up timing. Compare the same stages across sources before cutting one.
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