Insurance agency Rework Cost Exposure
Rework cost = sales × rework rate × (hours × labour cost + extra materials)
Gather time sheets, engagement scopes and invoice ageing. Include lead costs, service time, and renewal work. The starting figures are examples. Replace them with your own records.
Formula and worked example
Rework cost = sales × rework rate × (hours × labour cost + extra materials)
| Input | Example |
|---|---|
| Completed monthly sales | 80 |
| Sales needing rework | 5 % |
| Extra hours per rework | 3 |
| Burdened hourly cost | 40 |
| Extra materials per rework | 50 |
| Calculated result | 680 per month |
Choose reliable inputs
Account for delivery time, review work and when you expect to be paid for each engagement. For this insurance agency calculation, use time sheets, engagement scopes and invoice ageing and a consistent definition of one policy sale.
- Lead costs: include the portion belonging to this policy sale or reporting period, and record where the value came from.
- Service time: include the portion belonging to this policy sale or reporting period, and record where the value came from.
- Renewal work: include the portion belonging to this policy sale or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Why does rework matter beyond the replacement material?
Extra labour consumes both cash and capacity that could otherwise deliver new work.
Excludes customer churn and reputational effects; rates must be measured or labelled scenarios.
What if this input changes?
If completed monthly sales rises by 10%, this example changes by 68 per month. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.