Captive Agent wants to have wife open an IA.

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Captive Agent wants to have wife open an IA.

Postby scoutmaster1 » Thu Feb 07, 2008 6:24 pm

I am a captive agent with a large company. I have around 6,000 PIF, but am feeling that the end if near with the company I am with. I plan on hanging on as long as I can, but I want my wife to open an IA in the meantime. I can't be an active participant in any agency outside of my company, but I want to know if I present my licensed wife as the principal, and my background (loss ratio, production), do we stand a shot at getting appointments? I will be an officer in the IA corporation. I plan on sending all the business I can to my wife, and when I sell my book, I will not become an agent in my wife's office until the non-compete has expired, but will be an invisible owner. I am sick of my company's sh%$t, and don't want to be associated with them much longer. I have read some articles about Smart Choice, and ISIAA, but this seems to be a form of "Captivity" which is what we are trying to get away from...
Any suggestions? Thanks!
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IA for the wife

Postby LadyBroker » Fri Feb 08, 2008 10:04 am

Alot of my captive (Farmers) agents do exactly what you describe. Actually, it is probably a good idea overall, as any biz that doesn't fit in your captive can be referred to her, and she can either place it with the preferred markets that you secure, or go to an MGA/wholesale broker.
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Postby scoutmaster1 » Fri Feb 08, 2008 10:49 am

Thanks for the information.
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siphoning biz

Postby wlunday » Fri Feb 08, 2008 12:25 pm

Hey, Scoutmaster1. I'm an Indy, and I feel your pain. However, if I was a DM for one of the captives I would take notice of a dramatic reduction in production from a successful agency. And, investigate it!

I bet you have a contract that says any leads you acquire you must give "first and best shot" to the company that pays your wages.

This is a good thread to spin off to an ethical question...

Swymmer
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Market Access with no hassle !!!!

Postby ewguva » Fri Feb 08, 2008 2:16 pm

Look at http://www.agentsecure.com as their program allows YOU to own YOUR business produced through their carriers, including ACE, AIG, Hartford, Safeco, Zurich, OneBeacon, MetLife, Progressive, CNA, and others.

They have NO penalty or exit fees if you leave the program which costs as little as $25 per month.

There are currently 1,400 agencies , many like you Captives with wife or other family member running the IA.

They can be reached at 866.243.5934 x223
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Starting IA

Postby kevinraz » Fri Feb 08, 2008 2:41 pm

Scoutmaster, your plan sounds like it's on the edge of being unethical to me. Might sound good on paper and look legal but it sounds a bit shady. Ewguva says others are doing it, it sounds odd to me, especially if you are an owner or director of the IA.

If it's that bad, leave. Start your own IA, the year will pass quicky then pursue your clients with a vengeance. You'll get most because they bought from you, not the new agent.

FYI I'm former FIG myself as well. Good luck.
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Postby scoutmaster1 » Sat Feb 09, 2008 7:18 am

My contract allows my being a passive owner (or part owner in a corp. or llc who owns the IA). I would never break any part of my captive contract because I have a large book, and it wouldn't be worth it to risk being terminated (and losing the book). I wouldn't be working in or licensed with the IA--my wife would be agency principal, and have her own staff to help her with the business. I would merely be a silent partner in the LLC.

Thanks for your opinions however.
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Postby Sundance » Mon Feb 11, 2008 7:54 am

And I would presume you would be smart enough to NOT have the IA remotely close to your office...
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Independent

Postby LadyBroker » Mon Feb 11, 2008 9:58 am

As long as the business you pass over to the Independent side is business that your captive parent will not write, you should be okay. I see alot of Farmers guys doing this.

I don't know if you even have to have a separate business address, as long as you are placing the business with your parent carrier that is appropriate, and marketing what is not appropriate.

To be safe, I would check with your Home Office, or read your contract, and see what kinds of restrictions you might have. I have been told that State Farm agents are not allowed to broker business, but Farmers agents can. I am unsure about Allstate agents.
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Postby Sundance » Mon Feb 11, 2008 10:51 am

Allstate cannot broker either (only within the broker that they have to use). As far as Farmers, unless things have changed, yes many an agent has their husband/wife, child, relative, etc. become an IA, and most the managers know about it but then heads went to the chopping block several years back and the practice was to stop. Did it? Doubtful for sure, you see too many but the one thing that did come of it was that if you officed in the same bldg, you had to have a separate entrance, address, staff, phones etc.

If you are that lucrative of a Farmers agent I would be very careful in how you proceed. Kind of like risk management, why risk it? And be very careful, you being a corporate officer of this IA could put you in other situations including but not limited to E&O exposures.

Personally I don't understsand your desire to have all the additional expenses associated with a 2nd (albeit IA) office, Farmers can broker after first right of refusal, if anything, I'd save the cost, find an agent you can "pal up" with and set a commission split as well as an agreement that neither touches or approaches the other for the business they have. I've done this for years and it's been very profitable for both of us and as said previously, no additional expenses.
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Ind Agency

Postby doyourhomework » Mon Feb 11, 2008 12:09 pm

I don't know why this is of so much concern to you. As a wholesaler I work with a ton of Farmers agents as clients and most have separate sidebar agencies set up to handle business that Farmers won't write. Its totally not unusual, but it is common sense.....and they run it themselves.
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Re: Ind Agency

Postby Sundance » Mon Feb 11, 2008 12:38 pm

[quote="doyourhomework"]I don't know why this is of so much concern to you. As a wholesaler I work with a ton of Farmers agents as clients and most have separate sidebar agencies set up to handle business that Farmers won't write. Its totally not unusual, but it is common sense.....and they run it themselves.


I was wondering doyourhomework (by the way, good name), but do the agents you deal with actually SET UP a side agency or are they just operating what they broker under their personal name or a corp, LLC etc.? I mean if you think about it, none of the captive agents go signing as "Farmers Insurance" or "Allstate Insurance" etc, they sign as themselves and so when they do business elsewhere, they of course wouldn't have (for example) the Farmers name attached to any other contract or appointment they might sign. So my point being, they really, in a brokering case, aren't setting up another agency, they are only brokering what they are allowed to.

Also, I think that if one were trying to get an appointment with a company to say write personal auto and the rep of that company knew that you were a captive that the likely hood of you getting the appointment would be slim and that even if you were going to have your wife be the IA, well, my question as to being a rep would be why? Why do you need that avenue?

Ok, just rambling thoughts here.
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Postby mica.cooper » Mon Feb 11, 2008 12:43 pm

I work with a lot of agencies.

I have seen this the most with State Farm. Husband and wife with side by side physical locations. State Farm obviously had to know they were doing it. We even had State Farm agents directly quoting against independents. That was back in the late 90's and State Farm even provided us with rates, so did Allstate, Farmers, etc.

Things may have changed but now I only see Farmers agents quoting against independents. They are allowed by contract to place business with independents. Farmers agents are our single largest group placing independent business in fact.
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Getting appointments

Postby d's insurance store » Mon Feb 11, 2008 3:49 pm

Scout...your original question involved the likelihood of obtaining appointments with your wife as agency principal and not you, but the deficiency being your wife doesn't have the experience, nor the book transfer availability to sweeten the deal.

Without your saying so, I'm going to take the liberty of thinking you're coming from the Slanted A arena. If so, then keep in mind that MANY industrious agency owners from that environment have done what you're thinking of doing...they just keep quiet about it, locate the second location away from the Blue Sign and just go about their business. So, I'll work with the premise you can keep your mouth shut about your plans.

Depending on where you're located, different carriers have different appitites for growth. If a carrier is 'hungry' enough, the marketing rep will look at the circumstances with your presumed business input and marketing skills and offer up an appointment under your wife's business name. Or, if as you say, you're going to set up a corporation structure, then just present to the new company that you're both stockholders and you're the one with the business history and your spouse is the one with the marketing skills.

Some carriers are so hungry, they'll just offer up an appointment with proof of licensing and insurance. You may have to build a book through an MGA or cluster type operation until you've proven that you've got what a carrier is looking for in a direct appointment, and then you just BOR your brokered business back to yourself.

Put together a preliminary business plan, start contacting industry people like marketing reps, spend some time researching helpful trade associations and put out your feelers and see what feedback is delivered. If it were 'easy' then everybody would do it. With the proper groundwork and some lead time, you can probably pull it off with enough markets to begin selling. With enough signs of growth, then competitive companies will be receptive to talking with you.

One thing though...be real clear about focusing on either personal or commercial...you'll have much more credibility with the carriers if you don't present to them as going where the winds will take you.

Good luck.
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Postby scoutmaster1 » Mon Feb 11, 2008 6:18 pm

d's Insurance Store-

I assume by slanted "A" you mean Allstate, but I'm not an Allstate agent. Having said this, you have given me the absolute best advice I have gotten from anyone in or out of this forum. I sincerely appreciate everyone else's input, but you have given me the roadmap I need to make this happen. Others have asked why I would want to do this with the size book I have established? I don't see a relationwhip with my company that will take me to retirement. If I can get my wife an IA she can slowly build a book, and when the time is right I can sell, get as much as I can get, and after my non-compete join my wife in IA heaven. I know the grass is not always greener on the other side, but when you are looking at scortched earth, even brown grass looks appealing.

Thanks to all who have taken the time to give an opinion. I look forward to other's as well.
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