Questions on starting IA

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Questions on starting IA

Post by mdel »

We're a financial services company based in NC that wants to add P&C insurance to our list of services to our clients. I am trying to gather information to determine how to properly implement this. We are looking to gain contracts with multiple agencies to provide our customers with options (do their 'shopping around' for them). We have +1,500 existing clients that we can directly market these services to. My questions:

1. Would joining an aggregator/cluster be our best bet in obtaining a wide selection of carriers since we do not have any transactional history in P&C yet? If so, which are recommended? If not, what are the steps to obtain contracts with individual carriers?

2. What are the tasks assigned to a P&C agent outside of performing the consultation and application? What does the day-to-day look like for an independent agent?

3. As an addition to #2, what is a good rule of thumb for number of policies to agents ratio?

Looking forward to the responses,
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Re: Questions on starting IA

Post by MBRCatz »

Why, exactly, do you want to do this? I'm asking, because it sounds like you want to treat it as a side-line to the main business; you're not going to find a lot of carriers willing to do this. You're going to have to put forth a business plan on how you plan to grow your business, and a marketing strategy.

If you wrote 100% of those clients on personal lines - which is extremely unlikely - you'd have an estimated $3MM book of business. This is a very small personal lines agency, and likely isn't going to support contracts on your own, so yes, aggregators would be the way to go - if you can convince them this is more than a hobby, so they take you on.

Since you apparently have almost no information about what an agent does all day, the person you hire to do this should have strong knowledge of how the industry runs. Hiring this type of employee is going to be expensive; I'd expect you'll lose money the first year.

There's no good "policy to agent" ratio; it's going to depend on the level of automation you invest in, in your agency, as well as the type of policies, and how much service the clients require. I'd guess, if you have a 100% hit ratio on a straight personal lines book of business, you're probably looking at 2 people, including the time it's going to take to quote and write the new business.

Keep in mind, getting the licenses and contracts set up is the first step, but you probably need to hire a consultant at the very least, if you are serious about going down this road.
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Re: Questions on starting IA

Post by bkor3 »

Hi MD!

We are a wholesale agency that specializes in the Midwest, but has market access to many of our carriers nationally. Our office does a great job of working with new agencies that are looking for market access. Unlike many companies/MGAs, we do not have any minimum production requirements or sign up fees.

If you'd like more information, you can check out our website,, or give us a call at 800-869-2022 and ask for a member or our marketing team.

Grand General Agency
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Re: Questions on starting IA

Post by RichardCO »

NBRCatz hit the main points. I imagine that you'll need to acquire carrier access thru a service of some type. Here's some questions to ask when researching services (aggregaters, clusters, etc.).

1. Do you have a good carrier mix across the lines of business I want to use in my agency?
2. Are those carriers competitive in my region?
3. Do you have any production requirements?
4. Do you provide an agency management system?
5. Do you provide a comparative rater(s)?
6. Do you have a non-compete or non-solicitation if I decide your network isn't for me? If so... why?
7. Do you have any exit fees?
8. Can I sell my agency at some point?
9. If I sell my agency, do you take a cut?
10. HOW do I access the carriers... do I submit everything to you, or do I get DIRECT access to the carrier?
11. How long is my contract for, and do I get ownership right away, or over time?
12. What are the startup fees and are you willing to work with me if I need to make payments?
13. What is the commission rate?
14. What share do I get of the contingency bonuses (If any)?
15. What is the criteria to participation the contingency bonuses (if applicable)?
16. Do you offer guidance and training during the startup phase of my agency and a spirit of mentorship throughout the relationship?
17. Are you open to me contacting some of your member agencies before I sign the contract?
18. May I have an attorney, or third-party consultant review my contract with me?
19. How much industry experience does your network leadership have?
20. Do you offer customer service support for my customers, or is that support up to me? If applicable how much commission do I have to give up in exchange for this support?
21. I think the MOST important thing someone can do other than reading the contracts of many networks is speak to the owner/CEO/president of each network to get a feel for the culture. Let's face it, some people you like the minute you meet them, and then there are others that make your skin crawl .

One thing to note... This is just as much an interview of you to be a good fit for a prospective agency network. No network wants to be the quick unthought-through decision and asking these questions will strengthen the relationship with your chosen group. There are subtle nuances each network option will bring to the table and each will stress some areas over others.
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Re: Questions on starting IA

Post by lonestar »

mdel, you cannot treat the agency idea as a sideline to your current business. In order to keep your contracts with the carriers, you will have to continually show that you can write / produce enough good business every month, or they will remove your access and non renew the policies you have written. Also, you will have to maintain a certain level of retention with the carriers, and also have a profitable book of business.

This is not an easy thing to do these days, to start an agency and keep it going without much focus and effort.
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Re: Questions on starting IA

Post by insuranceoldie »

With 30 years experience in agency, I do not recommend adding 'P&C' to your investment business. Here are several reasons why:
1) You're not an expert in everything.
2) Successful agencies are full time agents who work insurance 24/7/365.
3) Insurers want premium builders, ongoing year after year.

Since you indicated you're an investment firm, which requires considerable knowledge and ongoing education to stay relevant, why add another regulation based side business? You should look for a successful P&C Agency to partner with by reciprocating referrals to each other.

Good Luck!
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Re: Questions on starting IA

Post by gebhardt »

I agree 100%. Pick one or the other and rock it!
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Re: Questions on starting IA

Post by Swymmer »

For all the reasons above, starting a new IA is a tough way to go. If there is some other compelling reason to have a P/C agency then I would consider buying one. You'll need to pay a premium so you also get the staff and agency rainmaker... the person that will have the knowledge and skills to cross-sell your current investment & banking clients. This may very well be the agency owner / CEO and he/she won't come cheap. But, at least you'd be years ahead of trying to create something from scratch.
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