With all of the attention being placed on mergers and clusters by independent insurance agencies trying to survive decreasing commissions and increasing costs, it’s easy to forget that there are still people out there trying to start new agencies from scratch.
If you would like to see one such person in the flesh, he will be at the IIAT convention. His name is Henry Font, and he and Roger Hawkins started Tri-Star Insurance Professionals in Lewisville, northwest of Dallas, in 1998. They’re still at it, and they like it.
Their story is important not only because what they accomplished is increasingly rare, but also because of the group of people they have joined.
They are among only about 380 IIAT agency owners under the age of 40. That age group has declined 15 percent since 1995. By comparison, the number of agency owners over the age of 50 has increased by 28 percent during the same period. If people like Font and Hawkins don’t take the plunge to start new agencies, our annual conventions in the not-too-distant-future will have to be held in nursing homes.
Their story starts in 1995, when hail losses in Dallas County led their employer, Farmers Insurance Group, to put a moratorium on new homeowners insurance sales. As agents in Plano, they had hitched their star to the homebuilding boom that converted prairies to suburbs in a relentless march northward from Dallas.
“I was on a roll until they shut us down because of hail losses,” Font said. “Other companies that didn’t shut down were gobbling up our business. I got tired of one company yanking my string—if they sneeze, I get pneumonia. I didn’t like having my livelihood based on one company’s ups and downs in the marketplace. So, I decided I would rather gamble with several companies than gamble with just one company.”
Font was ready to bail out in 1995, but he and Hawkins wanted to go into business together, and Hawkins was not as ready as Font to abandon his Farmers book of business.
“It took three years for me to make up my mind. We had good-sized agencies. I had a security blanket. It’s tough starting over,” Hawkins said.
Hawkins finally agreed in 1998 to make the leap, and they went to visit some independent agency companies. The reception was mixed: The companies would appoint them, but not in Plano-too much hail exposure there already with existing agents.
So, it was off to Lewisville, about 10 miles west.
The change in operations was not that great—they had the same agency staff, automation and office issues as they had with Farmers—but the change in culture was a welcome relief.
“Our companies now pay more attention to the agents than Farmers did,” Font said. “They are competing for customers, but they’re also competing within our agency. They’ve got to sell two people—us and the customer.”
They also like not seeing so much of their effort going to pay for company overhead. “There are layers of management in Farmers that the agents have to support, and the Farmers holding company takes their percentage off the top, so they make money whatever happens,” Font said.
A major plus was also the lack of company pressure to sell life insurance. “Farmers was very pushy as far as selling life insurance. They took advantage of their customers who had auto and homeowners insurance by selling them products that weren’t as highly competitive in price. A good life agent could come along behind us and beat our price,” Font said.
Font and Hawkins are walking testimonials for the independent agency system. “It’s nice, when someone walks in the door, for us to be able to have a market for them. We have lots of choices for our clients—if one company doesn’t satisfy them, we can offer an alternative,” Hawkins said.
They had two advantages not all start-up agencies have: (1) They learned how to sell non-stop from a direct writer, where they developed their selling skills and insurance knowledge for a decade; and (2) the direct writer provided a severance package, to keep their non-compete in force, that has allowed them to put most of their income back into their agency.
“One of the differences between Farmers and independent agents is marketing. We’re starting to see independent agency companies educating their agents more about marketing than they have in the past. We don’t wait for the phone to ring. We work at making relationships with people, and once you start taking care of customers, word gets around and you get referrals,” Font said.
Their marketing plan was hampered early in the game, when State Farm and Farmers reopened their homeowners markets in Dallas County, thus ending a major driver that was moving business into independent agencies.
But they are satisfied with their growth, and Font will be looking for commercial markets at the convention to allow them to expand beyond personal lines coverages. However, their advice to start-up agencies is to be conservative in estimating take-home income.
“The first couple of years, you’re not going to make very much money. It comes down to what companies you represent and your marketing strategy,” Font said.
Even though they are relatively young, neither one wants to repeat the start-up experience. “I wouldn’t want to do it again—twice is enough,” Font said.
But they see enough success in how far they’ve come in two years to know they made the right decision. They enjoy what they’re doing, and that’s what it’s all about.