Newbie, Should I Start a Farmers or Independent ?

[InsuranceGuy10101]

I am new to the business, I have a heavy management and sales back ground. I like the support that farmers gives me but I can't help but think that I will run into a lot of business that I lose to lower rates. I feel that I would be able to over come this with an independent. What are some pro's and con's ? what would you do just staring out? can I take my book of business with me if I leave farmers ? I have found companies like insurance noodle and superior access insurance that will give me the ability to sell the premium names. Please advise

[insuranceoldie]

Let me be straight forward. Starting a scratch insurance agency either as a captive or if by chance if you can get contracts, as an independent is difficult! Insurers want PRODUCTION of profitable business, ongoing. They want activity that results in policies issued every single month, non-stop. With no insurance experience you are at a disadvantage, not impossible but very difficult.

The captives (Farmers, AMFAM, STATE FARM, ETC) may own the book of business and you don't. They may offer training and a brand but it comes with a hefty price, your unwavering allegiance. To write insurance independently through a middleman (Noodle, SIAA, Superior Access & ETC) severely limits your commission revenue as they take a cut, and in fact THEY may own the renewal, check the contracts.

How much business do you foresee writing each year? Do you have a competitive insurer aligned with your agency? How much will your office lease, customer service employee payroll and tax matching cost you? What is your advertising budget? Where will you prospect? Do you have a nest egg to bankroll your agency's start-up? That is just a few tough questions to ask yourself.

Finally, have you considered working at an insurance agency to see if you like the industry? An independent agency would possibly consider employing someone who has ambition, prospects and the drive to succeed. Don't look for an agent to train you and hold your hand, that's what you'll do every evening for years after you've ran your appointments and sold policies to your prospects.

Keep in mind that captive companies recruit and train many agents each year. How many new agents are still with them in 1 year, 3 years and 5 years? The answer will astonish you. I have seen many a good individual quit a good job and try selling insurance only to end up in debt and owing the captive insurer money once they leave. The insurer may offer a cash allowance for a start-up but if you fail to meet their production you must pay it back- READ the contract before you sign anything!

If you're still set on selling insurance move forward with knowledge and understanding that you must work very hard and have prospects who buy from you in order to succeed.

[InsuranceGuy10101]

I hope to have my agents write ( Plus myself) per year
Auto: 80-90
Fire: 40
Specialty: 10
Commercial: 5
Life: 5

I hope to have three agents to start and quickly ramp that to 5-6 depending on the sucess of the employees. I am not sure what you mean by "competitive insurer".

I am concidering a space of 2000-2500 sq ft. I am in the DFW area planning on around $2000-$2700 lease

I was planning on a marketing budget of $30,000 a month for the first year

I will prospect locally in north fort worth and north dallas area. But feel the leads might be state wide?

Yes i have saved to bankroll the business. But i dont want to start down the wrong path. I like the support from farmers but dont like that i technically do not owe the business and have a NC. but i might not own the business if i go the independent route as well.
I am also not sure of the conversion rates for Farmer's, am i going to buy leads or market to a group that just is not priced right for Farmer's? If i was an independant then i feel i would have more options to provide the customer. At the other end maybe i can be a little more focused and effective on my marketing and leads becasue i would uderstand the primary market better.

I do not plan on being a full time agent. I am using this so i can manage the business. I will be active but definitely rely on the production of my agents, which is always scary.

I like the residual aspect of this business. Am i being realistic?

[insuranceoldie]

Probably not a good 'part time' endeavor.

How do you plan on writing these policies?
I hope to have my agents write ( Plus myself) per year
Auto: 80-90
Fire: 40
Specialty: 10
Commercial: 5
Life: 5

How will the business be brought into the agency? Cold calling, personal face to face prospecting, direct marketing, digital marketing?

Will the 5-6 agents have experience? How will you pay them commissions, salary, or draw? How will you monitor activity and success of your employees?

I'd step back and look at how you plan to achieve the sales goals. Then once you have a plan have several professionals you trust review it for implementation and perceived success.

[JohnnyLaw]

Hello Insurance Guy, believe can give you some tips. Full disclosure 12 years as independent, 15 working for large insurer, 7 years RM. Working as independent was the best move I made in the insurance industry. Think that the deciding factor you have is if you like to work in structure or work without structure. Farmers probably will give you quotas, training, etc. and if you want this type of management could be a good move. I wanted to also comment that the quota that you stated looked extremely light for the amount of agents you would have much less just yourself. A very limiting thing that you will have at Farmers is that you are selling their product and will not have access to good situations that come your way. i.e. suppose you insure a guys house and he asks you to be his agent for his commercial business that pays you $30k comm. You will have to pass because you do not have a distribution channel to access his market (Hartford, CNA, NW, LM, etc.). However if you were a independent you would have joined a cluster and have access. Sure the cluster will get a % but this sale will lead to others. As a producer I believe it is better to be perceived as "the insurance man", as I hear than the Farmers agent, Nationwide agent, etc. as it can be limiting.

My advice from just what I know about the situation would be to create a LLC, Join cluster, get a software system, and work out of your house to start with a PO Box. Learn the ropes, write some commercial business, get a pipeline, and then add people as you need and as cashflow allows.

[InsuranceGuy10101]

I do not plan on this being part time for the first few years. From talking to other agents that are successful it sounds like you (Johnnylaw) as well, have started in a captive market then made the transition later. I like the independent market much more, but where can I get training and support. Some of the clusters own your book as well from what I have been seeing.

I know my marketing strategy is going to be a moving target. This is where I would love to get advice from experienced/successful agents. Networking seems great and eventually would bear fruit but what percentage of business should come from it.

Networking = 20%
Cold calling =10%
Purchased leads =30%
referrals = 40%

would this be accurate? what am I missing ?

[InsuranceGuy10101]

I have noticed that the goals I posted are low. thinking it should be more like $15,000 in premiums a month with at least one life. do you think this is a real goal? or how do you set your daily, weekly, monthly and yearly goals ?

[agent14]

insurance guy 101.

I was 11 years captive with Farmers, I am now 8+ year IA. (Independent Agent)

Farmers changed their agency contract in 2009 to a much more restrictive one, with life quotas until you hit 2000 policies in force. (PIF). Also, their non compete is stronger too, AND you are not allowed any outside appointments with other carriers. The big thing to remember, you DO NOT OWN your agency. (Book of business) So, you can spend several years and thousands of dollars getting this thing off the ground, and when you leave you'll be forced to start over. And, Farmers can terminate you and "steal" your book of business at any time, they do not need a reason.

Feel free to read more information from current and past Farmers agents on a forum located here. http://myinsuranceworld.proboards.com/

Many long time, loyal Farmers agents are being terminated after giving Farmers the best years of their working career.

[mccluney]

Insurance Guy That is kind of funny. I would contact the Independent Insurance Agency Brokers of America. They have agent chapters in most states. They have insurance markets without a volume requirement and you own the business they have many resources available including : " How to start an Independent Agency. Help with obtaining E&O insurance and many other resources. You need to become active in agency activities, attend events and sign up for various insurance educational events. Believe me if you are new to insurance, you do not know anything about insurance. The faster you can "learn" the more successful you will be. Going to events where other agents are attending would be helpful with networking problems that you are experiencing and how to find Surplus lines contacts that will expand you ability to write additional business. In your area of operations, you will need to find your "niche" Just because Company A will write auto or home insurance, does not mean they will be competitive in your neighborhood. Company B might be a better fit. If you can talk with the insurance underwriters and company sales reps to find out their particular appetite for the types of business they want to write FIND YOUR NICHE.

[lonestar]

Insurance Guy 101....

If you go captive(with Farmers, also known as FIG) you will grow to loathe having to write life. As an ex FIG agent I can tell you the captive really beat up the agents to write life. On captive side, the commission is about half of what you would make on life as an IA. Just saying...

Since you already are aware that you will not own anything as a Farmers agent but the debt, why not partner up with an IA to provide you access with multiple carriers? You'll make more money, and be way more successful.

Kind of like the model of selling cars via CarMax vs. a single auto manufacturer: If you were to open a car dealership, why sell your soul to be locked into only selling Fords, when you can open a dealership and sell 30 different brands? Think about it.

[ziiqui]

My professional advice after 30-yr career with Farmers and 10-yr IA: Run, Forest, Run!!

[InsuranceGuy10101]

What is the best way to start an independent agency? Superior access ? What other companies are there that I can use to offer the top carriers ?

[agent14]

RE: "What is the best way to start an independent agency? Superior access ? What other companies are there that I can use to offer the top carriers ?"

This industry has changes SO MUCH in the last 5-10 years. It is no longer easy to obtain(let alone keep) a direct appointment with the big, established carriers in the IA channel such as Travelers and Safeco.

My point of view is from 20 years experience, 11 captive and almost 9 IA. I would suggest you check with SIAA and Superior Access. Your business plan will need to look solid. Both have their pluses and minuses. But, the main thing is not to get too caught up with cost to access the carriers, vs. to just get access to the major markets.

Hey, lets be frank: This is an extremely hard business to be in, even for most veteran agents. It is not easy for veteran captive agents to start an IA, let alone someone without prior agency experience. It might be best for you to see if there is a local IA in your town, who is open to bringing on a producer so that you can learn the ropes. I am sure some IA's out there, as long as the arrangement is mutually beneficial, would be willing to give your a fair split and an option down the road to buy out your book within their book, should you choose to leave the nest and fly on your own.

[agentcool]

Beware of the 90 day "no cause" termination clause.

[mightyquinn]

Any prospective insurance agent should ask just one question BEFORE he produces any business despite how minimal - if I work for a direct writer, who owns my business if I leave or am terminated??

The answer should be YOU. With direct writers the answer is always THEM.

If that answer is OK with you you are in the wrong business.