I'm Considering Opening an Independent Insurance Agency

[NewinSD]

I'm considering opening an Independent Agency. I have several years experience as a Captive Agent and very little experience producing for an Independent. Just wondering if any one has any words of wisdom for me? I have no idea of how to go about this...could anyone possibly recommend a book or some other resource of information? Also, I would be starting out small, working from home all by myself. I have never worked as a CSR before, is there somewhere I can go to find out how to type up my own certificates of insurance? One last thing...what do you all think is the likelihood that I could get appointments with big named companies such as Travelers, Allied, Blue Shield and Mercury?

[erniec42]

If you're from San Diego, Mike Russ insurance school has a course on how to start an agency.You can go to mikeruss.org

[volstrike3]

I don't think you will get direct appointments with those carriers unless you were a rainmaker as a captive agent and could document that very well. You should look into various clusters and aggregators that could give you access to those and the costs associated. Sending out certs is the very simple... but I would definetly get a good basic agency management system (Quickfile or Doris for the type in home agency you mentioned).

[Bob Lake]

You don't sound as though you have the necessary experience so my advice is to find a current independent who will allow you to own the book you generate. You will learn while you are putting business on the books and you can leave when you feel the time is right. Good luck.

[tsntyler]

http://www.smartchoiceagents.com/

You might check with these guys. They started out originally as a source for captive agents that turned independent.

They get you the markets without a volume commitment, and they endup getting about a third of your written commission, but, YOU own the business! Once you reach a volume of $50K, they spin you off and you get ALL of the commission.

Hope this helps!

[d's insurance store]

Once again, a request for a 'job in a box'....a simple, easy to learn, step by step, hand holding formula on how to open an agency and be successful.

You know...it just doesn't exist, and that's why there are captive companies, all of which offer all the necessary ingredients and training to take someone...almost anyone, actually, and get them to sell and service insurance. The State Farm's, Allstate's, Farmer's and others are very well equipped to offer a formula and enough 3 ring binders to launch an insurance business...where one can learn their proprietary systems and get a license and hit the streets.

Now most of us here understand the limitations and downsides to a captive environment and even if we got a start in that arena, now prefer and generally prosper as independents.

My advice mirrors the prior poster who suggested that if indeed it's time for you to leave the captive nest, that you hook up with a successful independent, start from the ground up, and learn just how different your world has been compared to an independent set up. Sure, it will feel like you're going backwards and you'll probably make a lot less to start, but launching an independent agency is much more than access to personal lines and small commercial markets, good rates and an inbound telephone to capture all of those quote calls you think you're going to get.

In this current marketplace especially, you'd have a tough row to hoe regardless of where you position yourself in the wide, wide world of independent insurance sales. And I'm not even beginning to touch on the behind the scenes, business aspects of running your own shop such as leases, comparative raters, agency management systems, computers, employees, producers and other assorted flotsam and jetsam that we all deal with as agency owners.

At the very least, if you're still in the captive ranks, start subscribing to industry publications and read, read, read, to get acclamated to the language of the business and some of the major players. Then take some time and go around to some independents, lay out your credentials and see what they say. Maybe running your own show isn't for you at this point in time, but maybe it is. You'll find out soon enough.

I don't want to squash your dreams, but it would be unmitigated financial folly to take your hard earned savings and think that it can and will be an easy transition from captive to independent in this financial environment. The days of getting a couple of preferred personal lines appointments, a couple of standard and substandard appointments, tying into a surplus lines MGA, hanging out a sign, placing a yellow page ad, sponsoring a local bowling team and making a success of a small shop based on referrals from satisfied clients is long gone, dead and buried.

Good hunting.

[AgencyEquity]

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[KPIA]

Having worked in operations on both sides of the fence (cap v. indep), I understand how daunting it is to make that switch. You will find that you know only a fraction of what you need to know to operate as an independent.

That being said, I caution this: Don't overestimate the loyalty of your current book of business. I remember when a number of long time State Farm agents got axed and a number of them went independent. When talking to them, I would hear things like "If I can capture just 50% of my current book..." My experience is that you will be doing quite well if you manage to capture just 5%, in fact that would be a monumental success, relatively speaking. This is especially true considering how tied your hands will be with non-competes, trade secret assertions, etc. from your captive company.

Expect to lose money for 5 years, expect your expenses to be double what you are anticipating and expect your 5-year deficit to be in the $100K+ range. It will take looooong hours, lean months and lots of hard work, but the rewards are tremendous. I doubt there is a successful scratch agent that doesn't remember the month they paid off the last of their startup debts. What a rush that is.

Finally, in this environment of growth starved companies, don't dismiss the possibility of landing some preferred appointments if you can show a history of good production and low loss ratios as a captive, but they will want to know what you will be doing to bring in new business, so have a good marketing plan in writing.

Good luck.

[AgencyEquity]

Kevin, you state that captive agencie should expect to:

1. Capture only 5% of their book
2. Lose Money for 5 years

What is your experience to come to such conclusions? I actually do have experience and the numbers are significantly better that. But on #1 it depends on how close of a relationship one had with their clients, on #2, it depends on how good of a business person and producer you are. My experience is that it's more like 2 years at the most, most especially since cost of running an IA had come down significantly over the last 10 years, thanks to better and more affordable technology.

[cheryzune]

Not directly related to your question, but did you work for an insurance agency before? it could you save a lot of money and time by learning from someelse REAL experience.

[gregcw]

NewinSD
This subject has come up frequently for Captives wanting to become Independant. I'm pasting several I/J links for you to read some of the other discussions. Admittedly I have comments in all of these having made the transition from FIG to I/A in 1989. It is not easy and I'm not sure how doable it is today, 22 years later.

Re: How can a new agent obtain appointments?
http://www7.intellisurvey.com/run/arfy1 ... 4980312786

Captive Agent wants to have wife open an IA.
viewtopic.php?f=2&t=2231

Another Start-up
viewtopic.php?f=2&t=2993

looking for some guidance on startup agency
viewtopic.php?f=2&t=2954

Farmers vs. Independent
viewtopic.php?f=2&t=2022

[Mannyace]

To be honest to you, you should act slowly and first settle with the current captive company so that you would not get into any problems with the current carrier.

Be honest to your clients and work the best for them. In the meantime, prepare yourself for the upcoming as is not that easy to get to be an IA.

Expenses will be one item in which you would need to look at it and get appointments mainly with MGA's, Brokers etc and work the prefer market to get the appointments according to their own rules.

It is hard, but it pays off after approximately 3-5 years.


Manny

[KPIA]

Well the experience I speak from does not include any attempt to roll a book personally but rather from speaking at length to about a dozen captives that got started in the late '90s after having their contracts terminated. They were quite sure that their previous clientele would just come flocking through the door, however those repeat customers never materialized and these, for the most part, were agents with the same location and phone numbers.

In terms of losing money, I can say that three years out, most of the agencies were still in the red, though only a few years later I know of at least a couple that were quite profitable. The five year figure I state is conservative, granted, but it was what I experienced, but to be fair, I had hired three people by the time that 5 years were up.

As with anything, your mileage may (and will) vary. I guess the jist of my post was to serve as a counter balance to the common rosy picture many start up agents have in their head.

Kevin, you state that captive agencie should expect to:

1. Capture only 5% of their book
2. Lose Money for 5 years

What is your experience to come to such conclusions? I actually do have experience and the numbers are significantly better that. But on #1 it depends on how close of a relationship one had with their clients, on #2, it depends on how good of a business person and producer you are. My experience is that it's more like 2 years at the most, most especially since cost of running an IA had come down significantly over the last 10 years, thanks to better and more affordable technology.

[d's insurance store]

I came from the Captive world 12 years ago. I too was told to expect a large number of my captive Personal Lines P&C clients to migrate with me....my original business plan called for 25% migration and many still in the captive world said that would be conservative.

If only I had spoken to KPIA first I would have saved myself a lot of grief and a ton of money. In fact, my experience mimics his pronouncement regarding retention of captive clients. A captive agent tends to get a big head when clients often say "If it weren't for you, I'd find another insurance carrier", or " you're the only reason I stay with 'captive' company". What I found was that given the opportunity to switch, even for better rates or enhanced coverage or both, the majority of my captive clients were in fact bonded with the company and not with me. I probably could have wrangled a few more clients if it weren't for signature requirements (remember, you needed wet signatures a decade ago) and new paperwork, but the fact remained, I thought I was more important in my client's insurance life than I really was.

My business model did not however lost money after the first year...so I guess I beat the odds.

[AgencyEquity]

The key to re-capturing your clients when transitioning from a captive agency to an independent agency is proper planning. You must have an exit and transition plan, this includes before taking steps to do things before a captive agency contract comes to a termination. You also need to understand the both the non-complete agreement as well as the applicable state laws that deal with non-complete agreements. Without proper planning, you may only re-capture 5%, but with some good planning, you should be able to re-capture 50%, especially the accounts you want. In most captive agencies, there will be some accounts that you should not consider bringing with you to you new Independent Agency. This includes very small accounts, accounts with poor claims history, and difficult clients. Keep in mind when starting a new agency, you have many more years experience, you should want a higher quality clientele as well as clients that are going to keep you out of trouble. Lastly, visit my site linked below, I have a section “Starting an Insurance Agency” which focuses on captive agencies and producers who want to start their own independent agency.