Newbie Question

[kent1108]

Hello all,

I am from Florida and while I have many years of insurance experience, I do not have any as a producer. I am interested in opening my own independent insurance agency (P&C and life). My first question is, where do I start? I have done my own research and have found out the following:

I will need to obtain my 2-20 license.
I will need to obtain an E&O policy.
I will need to obtain companies to produce for.
I will need my own office, supplies, compters, staff, etc.

Now, here's where it get's tricky. I have been contacted by a company recently called Brighway Insurance who is a franchise business. They already have contracts in place with over 75 companies to produce for. They require a 50k upfront "franchise fee" and I would need an additional 30k to open the office and provide a buffer until comission starts rolling in. Personally, I do not think this is a bad idea as they already have the contracts to produce in business and from what I understand, these contracts are not easy to obtain individually from companies, especially for a new agent.

Can anyone provide their thoughts?

Thank you!

[d's insurance store]

I don't want to rain on your parade, but experience in 'the industry' is far different that having experienced the 'thrill/agony' of living as a producer (ie, commission only income) or for that matter the difference between being an employee and a business owner.

There are vastly different skill sets for both positions, and merely having some knowledge of insurance, in whatever dicipline you were in may not give you the wherewithall to survive the rough few years that virtually every start-up business goes through.

At the risk of offending your dreams, I would first cut my teeth on a sales job, to learn at someone else's expense just what you experience asking for business. Perhaps a smaller shop that has the appointments, but needing a producer so that you might also observe what's involved in actually running a business.

Analyze just why you want your career path to head in this direction and overlay that with your own strengths and weaknesses. Do you want to just be the boss, who gets to play golf four days a week,and drive a Mercedes while the underlings do the day to day work? Do you actually like the selling process and want to be the agency producer? Would you find your best efforts put forth managing the agency, doing the day to day transactions and marketing, while a more motivated producer brings in the business?

If you're hell bent on jumping in...the at least understand the risks, personally and financially and perhaps start with a franchise operation. What you'll give up in commission split will be more than made up in experience. But that begs the question, do you really think you can run an agency with all of its associated costs with 'shared' commission rates. Shucks, you might be able to come close to those commission rates without any of the overhead as a successful producer at someone else's agency.

Good luck.

[kent1108]

Okay maybe I didnt explain myself good enough. My experience in the field of insurance is as an underwriter for the largest P&C insurance company in the industry. I held directly accountable for the agents I underwrite for in my assigned area. No, I have not owned a business but I don't think that detracts from my educational and professional background. I possess an MBA from a well respected school and am not just "jumping in" to this arena as you put it. No, I am not the type of person who would enjoy playing golf 4 days a week. My heart, mind, and wallett are invested in the insurance industry. Yes, the draw of operating and running my own business and personally helping my clients is what interests me more than anything.

[Insismypassion]

Hey Newbie,

You sound like you have a good history in insurance and excellent educational qualifications; sadly, your clients (or potential clients) don't really care. Take it from someone that has multiple designations, many years of experience and the previous owner of my own agency.

I take it you were a field underwriter or marketing type at the carrier? It's a wholly different game, even from that as a field underwriter.

Don't get me wrong, I'm not trying to talk you out of this; nor do I think you are going into this without adequate research; but I do think the previous post is right - cut your teeth at someone else's "expense." This will allow you to find your niche, get comfortable and make industry contacts that may change what you think you want now.

Better to do all that without your money on the line in case you find it's not what you thought.

Again, I admire your desire just offering my 2 cents (and you get what you pay for).

[kent1108]

Yes, I work in the underwriting department but part of my job is training new agents on the sales process. I am basically acting as an agent, without writing business. I train agents on how to grow their book of business. Thank you for your thoughts!

[Porter]

Have you thought about buying an existing agency? That would seem a better idea to me. Thowing 80K out the window with nothing in return does not seem that great of a deal.

[kent1108]

Yes, I have considered purchasing an existing agency and am doing a little research on it now.

Thanks!

[wlunday]

Hey, Kent1108... Porter's idea of purchasing an agency is a great idea. If you can find an affordable agency, put maybe 20% down and make payments out of the cash flow to the retiring owner... and pay yourself back for the 20% as well at interest over a 15 year period. My CPA recommended the 15 year perchase cycle, as that's the depreciation recovery period on the residuals you bought. It works very well, and allows you to build on the book, to have access to markets not normally available to newbies. If you can, work it into the deal so the former owner stays for at least 6 months, full-time, to help in the transition. This feature helps convey to the clients that both you and the "old" owner have their best interests in mind and want to assure them the agency will continue as always. You will have to offer the seller a better price, but it's well worth it!

Good Luck!

Swymmer

[kent1108]

Thanks for the info!

[insperson]

Since your original post was awhile ago, you may have already made your decision but I thought I would add my opinion since I just joined.

I was a very successful company underwriter who purchased part of an agency. I was living proof of the comment by d's insurance store, "experience in 'the industry' is far different than having experienced the 'thrill/agony' of living as a producer..." Also, dealing with insurance agents who speak the jargon is far different than dealing with insureds to whom you have to explain everything in plain language. I never learned to like the agency side. I did gain tremendous respect for successful insurance agents.

That said, you do appear to have a good foundation and I am not trying to talk you out of going into the agency business. I think a producer job at an existing agency would be a good first step. That way you can learn about all that goes on in an agency that you never learn from the company side. If you are still looking to purchase an agency I may be able to help. Feel free to contact me.

Best wishes in whatever path you take.

insperson

[jzeledon]

Here's my two pennies:

Why not try to write business with MGA's, MGU's or Wholesalers? Of course where they are competitive is e&s business. Therefore you are not competing against STANDARDS.
If that's what you want to do I know of a company that will write the business without any commitment requirements.

As far as getting some activity give me a all and I will be more than happy to answer any questions.

John Zeledon
Account Executive
(949) 472-2746
(800) 736-9741 ext. 3066
http://www.nmsdata.com

"Lazy hands make a man poor, but
diligent hands bring wealth."
Proverbs 10:4

[Shagster12]

One thing I'd add here.
With revenues on the agency side 1/2 of what they were 2 years ago(give or take), buying an agency or starting one seems a dangerous proposition at best right now.
My advice would also be to look into working as a producer under someone else for awhile, while learning from them the day to day functions of running an agency. In a couple years after you've seen the ins and outs and (hopefully) the market has changed again, then go back to your plan.
Shagster