Client lifetime value (LTV) is the total commission an agency expects to earn from a client across the entire relationship, not just the current policy term.
The calculation
LTV = annual commission × expected tenure in years
And expected tenure falls directly out of retention:
Expected tenure ≈ 1 ÷ (1 − retention rate)
A client generating $400 of annual commission at 88% retention is worth roughly $400 × 8.3 = $3,300. The same client at 93% retention is worth $400 × 14.3 = $5,700.
The point that changes decisions
Nothing about that client changed. Their premium is identical, their policies are identical. A five-point retention difference nearly doubled the asset value of the relationship.
This is the number that makes retention spending legible. Agencies routinely approve acquisition costs of several hundred dollars per new client while declining to spend a fraction of that keeping existing ones — because acquisition cost appears on an invoice and retention leakage does not appear anywhere.
Using it properly
LTV should be calculated per segment, not as a single agency-wide average. Monoline personal auto and multi-line commercial accounts have LTVs that differ by more than an order of magnitude, and blending them produces a number that justifies nothing.
Segment-level LTV tells you the defensible budget for retaining each group — and usually reveals that the agency is spending most of its attention on the segment with the lowest lifetime value, because that is the segment that generates the most inbound noise.