A Guide to P&C for New Agents and New Agencies

Discussion in 'Getting Started Selling Insurance' started by NCAgent, Nov 2, 2012.

  1. NCAgent

    NCAgent Well-Known Member

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    North Carolina
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    Hey guys,

    So this is still a work in progress but I wanted to at least get this part up here. I'll add and edit things over time until I like how it looks.

    This thread is meant to help people who are trying to make a change in their career to P&C insurance, and for people that are looking to make a change in their current P&C careers. Hopefully this addresses some of the common questions that we see on this forum from newer insurance agents, and will be a good guide on how to start off right in the insurance field.

    Crabcake Johnny also made a similar thread that was more geared for health insurance. It’s a little older and is targeted for health insurance agents, but it is still a good read as well.

    I’ll try to monitor and update this based on agent feedback and if I notice any issues or things changing such as laws, new classrooms, or add things I think are necessary in the future. The goal is to make this a consolidated “baby’s first insurance agency” thread so people have a reference point for asking questions. Any feedback is definitely appreciated!

    Part 1 is for people looking to become insurance agents, while Part 2 is for people that are already licensed, and Part 3 is for more specific issues that are faced with Part 1 and 2.

    Part 1: Starting off as an agent (years 1-3)

    Becoming an Insurance Agent

    The requirements to become a licensed property and casualty insurance agent will vary based on the state. However, most states have very similar regulations on how to get a license. For many (if not all) states, you have to take a formal training class (either online, self-study, or classroom setting) that requires you to pass a test. Please note this is NOT the licensing test to get your license. The class length varies depending on state requirements, but in NC the class needs to be 20 hours per license (one for property, one for casualty, so 40 hours total) before I can sit for the test. Each vendor will give different requirements for you to take the test, re-test procedures, and etc. Once you pass that class you will be given authorization to sit for the property and/or casualty license exam. Hopefully that exam and the final test for your licensing class are similar. This test is multiple-choice and will ask you state-specific questions about insurance. After you complete the test you pay some fees and fill out some forms and you have your license!

    I personally sat for a classroom test for my licensing for P&C. However, I took my life and health through examFX and they were pretty in-depth and informative. I was also told that Kaplan has a licensing class and zero chance to fail was good as well.

    The state also might have requirements for the individual, such as asking if you have been convicted of any felonies, owe back child support, have any back taxes, and things like that. If you have concerns then talk to your state DOI BEFORE going for the licensing test as you don’t want to waste time and money if you cannot get your license.

    You will have to obtain a license for each state you plan to sell insurance. You don’t have to keep taking the class and passing 2 tests for each state, though I recommend you do something to learn the state laws so you are in compliance. This is useful for people that are “border agents” that can frequently encounter people in 2-3 states, such as me for NC and SC. I have licenses in 11x states for my agency and I have to pay fees for each of them, file paperwork for each of them, and I am responsible for knowing the laws of all 11 states so I can make sure I am not violating any regulations or screwing my client with products or advice.

    I Have A License, So Now What?

    Congratulations, you have passed the first barrier to becoming a successful insurance agent. You now are chocked full of insurance laws and information that you probably didn’t know before, and have a taste for being an insurance professional. Well, now it’s time to REALLY learn insurance. One of the things I wish they spent more time discussing in my licensing class was the role of UNDERWRITING in insurance; they spent 10 minutes on it in my licensing class but it is one of the most important things you will have to learn as an agent. You’re at the point in your journey where you can read up on a bunch of things but you’ll probably be more successful (and richer) by going out and trying to sell insurance products.

    My advice is this: Do NOT go out on your own immediately. You MUST work for someone before working for yourself. You will be amazed at how little you know because about half the things you learned in licensing will not apply, and half of the other things are probably going to have exceptions that you need to know. Go out and find yourself an agent that is already established and work for him or her for 2-3 years to learn the ropes. By becoming your own boss you have to learn insurance laws, insurance carriers and products, and how to be an accountant, manager, sales-person, service rep, janitor, and everything else. It’s just too much to learn all at once.

    There are multiple benefits to working for an agent. First, you have a mentor that will always check what you are doing to make sure it is done right. He will tell you to add coverages, remove them, say why they are important, and how to ask the right questions to make sure you cross-sell properly while also effectively protecting your client. Your boss will also have carriers already provided for you (if independent), support in some fashion, and E&O to protect you (E&O is your malpractice insurance, like what doctors and lawyers have.) Most of the things you need will be furnished, or you at least know what you are responsible for. Some agencies might even provide you benefits or a salary or the chance to own your own clients after a period of time working for them.

    Some of the downsides to working for an agent: You most likely cannot sell insurance unless it is through the agency, which isn't a big deal unless you have licenses that your boss doesn't like for medicare or life insurance. You will not earn 100% of the commission owed to you as your manager will get a piece of what you earn for his time and to justify the expenses he incurs taking you on. Think of it as college tuition for the school of hard knocks. Your manager or co-workers might be a dick and you don’t like them, or you don’t like your work environment. Most of the issues with working for an agency stem with a work environment problem, a perceived feeling of lacking agent support, or agents wanting to make 100% of the money from a sale. I’m not going to tell you to stay, but make sure you are making the right choice before moving. It gets a lot harder going off on your own and you need to make sure the problems are with the agency and not yourself, lest you face the same issue with your next agency.

    This is where you reach a fork in the road: You can either sell insurance as a “captive” agent, or as an “independent” agent. Either way you are going to have a boss, insurance to sell, and a commission split. The difference is what kind of insurance and what kind of boss that you have.

    Going the Captive Insurance Route

    One of the terms you will hear on this forum is a “captive” agent. When most people think of insurance agents, this is who they think about. For most agents, a captive agency is where they will start during your career and then eventually move to independent. A “captive” agent is someone who can only represent one or a limited amount of companies, usually with stipulations attached to it. These are your Allstate, GEICO, USAA, State-Farm, Farmers, Farm Bureau, Nationwide, and Liberty Mutual agents, and others depending on the area . For the most part, if a lay-person has heard of the insurance before then it is most likely a captive. The only real exception to this I’ve seen nationally would be The Hartford. Captive agents sign a contract agreeing to represent one company exclusively or semi-exclusively with access to other carriers ONLY with the permission of the mother captive company first. Even if the captive company says you can access other companies, you are probably getting a commission split from it (rather than the full 100% commission) and the captive company might say they will only let you quote with other companies AFTER they refused the business first.

    I can already hear people asking: Why on earth would I want to be with a captive company? For many agents this is true. However, the captive companies do give benefits to the agent as well. Some companies will make you a W-2 employee rather than a 1099 contractor, such as Liberty Mutual. You also get exclusivity of the company because not everyone down the road represents that company (in theory, anyway) including the independent agencies. You get free or discounted advertising, such as the road signs for State Farm agents or mailers to send out to people looking for quotes on their insurance, and the commercials that you see all the time while trying to watch re-runs of Buffy the Vampire Slayer. You also get HEAVY name-brand recognition for most of these companies. These companies will also frequently help you set up an agency shop, finance you for some years based on production agreements, and can also give you (either initially, or permanently) higher commissions than some independents get (again, in theory.) Another reason why you might want to be captive is for the assistance of other agents and the support team (which you might find to be more responsive than some independent companies), AND for the fact that you only need to know one company to be successful. You can learn the market, underwriting, quoting, and talking to clients with one company and then you are off to the races! Therefore, it might be easier for some newer agents since everything runs through one company.

    There are some downsides to being captive as well, however. As a captive, you might be getting less commissions than independents (see how I mentioned higher commissions above, though?) and are subject to the decisions and activity of one company. One of the most frequent complaints that you hear captives talk about is changes to compensation AND rates going up in the area. If a Farmer’s agent has rate changes in his area to where he is no longer competitive, then he has a direct loss on his profits and income for his agency and can't do anything about it other than hope he gets competitive again. This is one of the largest risks you encounter with being a captive agent. You also are subject to production requirements for property, casualty, and possibly life, health, or securities products as well that could affect your compensation. Combine the production requirements with rate increases in the area and some agents start to feel the pressure. You will also find that most captives (though not all) are not the best in writing commercial insurance, only personal lines. This means that you are limiting your markets and what you can write. As a result of these downsides, many insurance agents learn the ropes as a captive and then move on to be an “independent agent.”

    Going the Independent Insurance Route

    I am an independent agent so I have some partial bias, but I was also an Allstate agent, too. I’ll try to be as impartial as possible, however. Because of the various companies you can write with, some, all, or none of these things may apply to you.

    You can work for independent insurance agencies as an employee/contractor as well, though many people don’t do it until they worked for a captive first. Independent insurance agents are just that- independent. They can choose what companies to represent and what companies to write business with. An independent agent can go to ANY insurance company and ask them to be appointed to represent the company for writing business; however, they can and frequently are declined depending on their size, the company they want to represent, or other factors. Also, the captive companies like Allstate and State Farm aren’t going to approve an independent agent because that conflicts with the requirements of the agents being captive, so they are going to decline independent agents or force them to become captive. Either way, an independent can go solicit any company because they don't have a contract forbidding them from doing so.

    Some of the benefits of being an independent agent: You have multiple companies to write with instead of just one. This is the BIGGEST benefit to being an independent agent. You are not at the mercy of the rates and underwriting guidelines of one company so if rates change then you write business with another company rather than hope the market realigns for you. You will also find that you can probably offer lower rates than most captive companies, and with better coverage as well (including coverage the captives might not even offer). This is because of the fact that independent companies are more selective in their markets and want to attract specific people. As an independent agent, you are most likely able to provide the coverage needed for commercial businesses FAR better than the captives, meaning more business with higher commissions. You also will find that you can place business for more clients that have issues such as credit, losses or tickets, or high-risk items such as faster cars or 1-2 million dollar houses. You also have the designation of being “independent” which means that some people like to support small business, and you will probably foster some excellent relationships. This isn’t to say that you can’t do this as a captive, but when was the last time you asked the CVS cashier how their children were doing vs. your local independent pharmacist? The independents may also get more commission than captives, though that isn’t a fact carved in stone.

    Some of the downsides to being an independent agent: You have a LOT to learn and keep straight- underwriting guidelines, carrier appetites, rates, coverage’s available, rating systems, billing systems and protocols, claims procedures, new business and renewal procedures, and much more. It can be daunting to learn that for one company, let alone 8-10 or more. Another issue for someone is GETTING the carrier appointments, which will be addressed in another section, and then MAINTAINING them once they are in your agency. You also will notice that some people will turn their nose to your carrier recommendations since they are not the “big name companies” like the captives are above (which you promptly tell them to go pound sand and find a captive.) Insurance carriers also realize they are independent, meaning they are a lot pickier than some captives are. When you are captive, you can only use one carrier so the carrier tries to make it so they can accept all types of risks with some degree of reasonable pricing. However, for the independents, the independent companies recognize that you can use more than one carrier so if they don’t want a risk they will make sure you put it elsewhere (either by declining it or make the rates unappealing), basically allowing them to cherry-pick their target market. This is a good thing as well since the carriers offer lower rates to those people, but it can be frustrating if you cannot place a risk because all your carriers target the same class of people and your client isn’t in that class.

    Working for an Agency and How You Get Paid

    As an insurance agent, your job is to either bring in business or service current accounts. You will probably do both, but larger agencies try to separate that to make sure clients are handled properly and producers (the sales people) can keep selling. You will most likely be commission-only at first, though you might get lucky and get a salary or benefits starting out.

    I cannot emphasize this enough but insurance is not a get-rich-quick market. In particular, P&C is one of the slowest ways to get money out of all the insurance lines available. P&C is very much the line of “slow and steady wins the race.” If you are unable to pay your bills easily or don't have another supporting partner to help you in the beginning, then you should probably wait on entering this business. A general rule of thumb is that P&C agents don't start making it to adequate money (only you know what that amount is though) until 2-3 years in.

    As an insurance agent, you get paid based on the contracts you write clients for the insurance companies. Basically, you get paid to write policies. As a customer service rep, you get paid to service policies, often at an hourly wage with a bonus depending on other factors. As a P&C agent, you get paid on the principle of commission renewals. Life insurance agents (I’m leaving health out as its own class really) get a large chunk of commission the first year and then a small amount (if any) for a few years after writing a policy. On the other hand, insurance agents get paid a smaller amount for writing a policy but get the same, or a similar amount, every year that client is with the agency. The benefit here is apparent: As a P&C agent you can bust your ass for a number of years and then just maintain a book once your agency is at the point that it brings in the money you want. Insurance companies also provide bonuses after writing a certain amount of premium under that carrier, subject to the amount of losses that book of business has suffered from claims being paid out.

    Typical commissions run between 10% and 15%, though some companies pay higher for certain lines up to 17-22% or more. Some captives will pay you less but in exchange for other things such as higher commissions on other items or for free/reduced advertising. For you, think between 10% and 15% to keep your life easier. This means that every $1,000 in premium you write you get $100-$150 commission, which is then further reduced to whatever commission split you have with your agency. It doesn’t sound like much but people HAVE TO maintain insurance on mortgages and to drive down the road, so it becomes a commodity product for some. You also can find bigger premiums (and more complex issues and cases, too) for commercial accounts. The business is out there and people always want to save money and/or protect their physical assets properly. Go out there and sell!

    Over time you will decide if you want to stay captive/independent, move to the other side of the field, or start to work for yourself. The next logical progression is to become your own boss, which is the subject of part 2.
    Last edited: Nov 4, 2012
  2. newindy

    newindy Active Member

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    Keep it up... Love it! Very helpful for me since I am a start up agency.
  3. NCAgent

    NCAgent Well-Known Member

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    North Carolina
    Part 2- Becoming Your Own Boss and Starting Your Own Agency (years 3-5)

    This section is going to be written from the side of an independent agent. The reason being is that some of the stuff applies to captives as well, but some of these things do NOT. Meanwhile, an independent agent needs to know them. Some of the stuff is common sense on if it applies to you. In addition, your captive company will tell you how to start your own agency and what they can do to help. This is why they get some of your money, so talk to them and get it worked out! This is not meant to be your business plan and you have to decide on your own circumstances if these things need to change.

    I also want to mention that I think that you shouldn't cross-classes when starting an agency. This means that if you are captive then don’t open your own independent agency, or if you are independent then don’t open a captive agency. Go work for an agency of that class for a while to learn the ropes for carriers and markets, and THEN open your agency if you decide it is a good fit. Otherwise you are still learning too many things at once and you can't focus on growing the business because you are still trying to learn the basics.

    At this point, you have been working for an agent for a long time now and you are starting to get the itch to be your own boss. There is bigger risk and bigger gain associated with this, so make sure you do it right as this is now YOUR business. There is no one to bail you out, no one to take the blame, and most importantly, no one to make sure you are doing things RIGHT.

    As an independent agent, here are some of the things that you need to be successful:
    - Start-up Capital
    - E&O insurance
    - Carriers to write business
    - If required, an office location
    - A business plan for growth

    Let’s go through these items one at a time:

    Start Up Capital

    I mentioned it before but it's worth mentioning again. This is NOT a get-rich-quick operation! You have to pay your own bills and then also operate your agency under the impression that you will not be truly profitable for several years. Each year gets better, however, as long as you build renewals and keep your clients from leaving.

    Try to keep 6 months to a year worth of expenses in your bank account, or at least enough to make sure emergencies are covered if you have someone else supporting the household. Businesses often die young that have great ideas because the owner couldn't afford to go through with it.

    Decide on how you are going to be marketing. This will be addressed more in the business plan but the phone isn't exactly going to ring off the hook because you put an add in the phone book.

    Try to keep your expenses low when starting out. You don't need a CSR, you don't need a comparative rater, you don't need an agency management system, a fancy document scanner, and things like that. You need your E&O, a file cabinet (barely), a phone, computer, a good outfit to wear, and a car.

    E&O Insurance

    This is important to keep. This is one of the only things protecting you from making one costly misjudgement. E&O (your errors and omissions insurance) is the malpractice insurance. It is EXPENSIVE for P&C compared to Life and Health insurance. As a newer agent with less than 3 years of experience, your agency could be $2-3,000 depending on your region, book of business size, and other factors. It can be quite costly, and it will probably be on a non-admitted basis at first (meaning that some coverages are stripped out.) DON'T CHEAP OUT ON THIS. Keep your deductible to a sustainable level that you can easily come up with, have at least $1M per occurrence, if not more, and read the policy to see what is covered. Determine if defense costs are inside or outside the $1M in coverage, if you can write life and health as well, and see if there are any glaring exclusions that you think are relevant to you. Utica is a good company but they can be pretty picky. They are one of the go-to carriers for agency E&O, while Rockwood is good for the newer agencies. E&O for less and NAPA insurance are also supposed to be pretty good, but they are just for one agent according to the reps I spoke with, so if you plan to have 2+ agents then you need to change your E&O carrier. Your insurance carriers often judge your E&O as well by looking at the company, your limits, and deductibles, and often have requirements before you can start writing their products.

    Keep in mind the cost of your E&O as it can go up or down. Don't let it lapse because as a claims-made policy you can REALLY screw yourself even if it lapses for ONE DAY. I cannot stress the importance of your E&O the way I want to, just know this is a big deal.

    Office Location
    You have to decide if you are going to work from home or if you are going to work in a brick and mortar building. Ideally, working from home is better since many people buy insurance on the phone, at THEIR house or business, or at a common place to meet. However, some companies all but require a building to appoint you. Both options can work, but decide on the expenses with keeping an agency open and see if it fits into your budget.

    This is really all part of start-up capital but this is the largest expense someone makes when opening an agency, one of the things that sinks the most money. Personally, if you aren't going to start your agency with 2 people and start with a large book of business or well-funded checkbook, skip the office building until you are a few years into renewals. You won't get walk-in business but the money spent on an office for walk-ins can go towards marketing instead.

    If you MUST have an office location for carriers or other reasons, try establishing a virtual office. A google search will be your friend here but a VI basically is an office that you can establish for yourself in a building that you can have your mail delivered to and visit multiple times a month for meetings, and probably includes a board room as well. It gives a professional appearance for clients who want to visit you, but reduces expenses since you don't have to pay for an office the entire month or for all the associated utilities.

    A Business Plan

    Your business plan should be formally written and something you review at least 2-3 times a year to make sure you are on track. Carriers often ask to review your business plan to see if the production goals are reasonable and if the people you are looking to target fit within the target markets of the carrier. I wasn't kidding when I said that independent companies know they won't be the only one in the office, so they want to know if you can give them what they want.

    Your business plan will consist of your marketing efforts and what you plan to do for expanding purposes. You really need to have several ways to market that vary in pricing so you know what is effective for you.

    Some of the major marketing items people do:

    1) Cold-calling (cheap and capitalizes on your free time)
    ------Eventually you can hire a telemarketer to do this full-time
    2) Door knocking (business to business aka "B2B" or door to door for consumers aka "D2D")
    3) Networking with "centers of influence" which are the people who can provide you leads as a part of their hobbies or professions. This includes lawyers, real-estate agents, mortgage brokers, homeowners associations, heads of specialized hobbies like motorcycle groups, and etc.
    4) Mailing pieces of mail to people to solicit a quote. This is often expensive and the ratios of response is usually 1-2% per 1,000 though it could be more or less. The price of this can often be cost-prohibitive for newer agencies.
    5) Participating in events like conventions, meetings, flea-markets, car shows, and things like that to target certain markets. Just like mailings, these can be cost-prohibitive.
    6) Purchasing leads for people expressing an interest in insurance quotes. These can be expensive and also "junk leads" depending on the company, so it can be hit-and-miss, though spending some money on leads can definitely give a good payout.
    7) Generate leads online using websites of yours or others. Having websites for specific markets you want to target and then trying to make them rank in the first page of google can be time-consuming but relatively inexpensive if you do it yourself. There are two schools of thought for generating leads- SEO and PPC. Do a forum search for more information on these.

    There are plenty more but these are some of the basic ones people think about. Depending on your own target markets, you knowledge and experience, and who you know, you will probably have more options.

    Your marketing plan will also consist of how you plan to grow. For example, mine talks about having 2 more producers and then when the book grows to a certain threshold or policy count, hire a CSR. It also talks about getting a telemarketer to maintain cold-calling. I also mention some specific growth factors for my agency and the intent to open up another shop in another state. Those are the things the carriers want to know because many agencies flail around and waste the time of the agents and the carriers.

    A good and unique business plan will do nothing but help you with getting carriers. A carrier on the fence with appointing you may review this plan and decide it is worth taking the risk. Consider this something higher on your priority list because it puts into words what you want the carrier to know and express but can't do so verbally.

    Carriers to Write Business

    I feel like this almost deserves its own thread but I'll try to make it easy for you here. Your insurance carriers are what make you unique, special, and able to make your money. Insurance carriers tailor their underwriting, appetites, and coverage contracts to what their specific markets are. You need to think about who you are trying to target first so that way you know what carriers are good for you. If you worked in an independent agency for a few years like I said to, then you probably already have a good idea on what carriers are big in your area and which ones you can get first in the agency.

    In general, here are some of the categories you will want to fill for your agency. You might have a carrier that can do 2+ of these categories, but make sure you can write a widespread of clients while you build capital, and then later you can start specializing.

    -Preferred insurance clients. These people are the ones with nice houses, good credit, loss-free, package accounts, and etc. These are what the majority of carriers want, so you probably won't have a shortage of these carriers.

    -Auto-strong insurance companies. These are for the people that only have auto, no home (or maybe they rent.)

    -Non-standard home and auto carriers. These are for the people with some accidents and tickets, smaller homes with some claims, and/or lower credit. These people need insurance as well and are typically price-conscious, but may also be customer-service heavy. Progressive, Foremost, and GMAC are usually well known for this area, among others. Non-standard carriers also will be more likely to write in loss-prone areas as well.

    -Flood insurance carrier. Any carrier, whichever one pays you the most. This is because all flood programs under the NFIP are using the same underwriting guidelines, rates, and etc. under the write-your-own program. If you get production credit with an insurance company for writing flood as well, even better!

    -Monoline property carrier. This may or may not be an issue in your area, but in NC and SC the monoline market is a hard one to come by. Some clients don't own cars, need insurance ASAP for a home closing, or have auto issues that make it so you have to write home with one carrier and auto with another. ASI and UPCIC are good here, Foremost also can typically do mono-line properties as well.

    -Any carrier for coastal insurance if you are in an area where you might write a lot of that. This will vary based on state. You might not need these depending on where you are.

    -Though not necessary, it can be helpful to have some well-recognized carriers for your agency. Travelers, Progressive, The Hartford, and a regional carrier like Erie or Donegal (at least in my region). They can sometimes be great on rates or coverage but it also shows the clients that you have carriers they know and that you are a "totally legit" agency. It's more for show but the carriers will probably service you well in the agency. In particular with this, The Hartford is great on commercial and auto, Progressive is good for non-standard auto and "toys," and your regional carrier will probably be one of your most competitive carriers that you offer. I definitely think a regional carrier will be beneficial to you.
    Last edited: Nov 4, 2012
  4. NCAgent

    NCAgent Well-Known Member

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    North Carolina
    Part 3- Addressing Some Concerns of Newer Agencies

    This section is for some issues that agencies will commonly face when starting up or trying to expand. Part 1 and 2, if followed, will most likely lead to your success as an agency if you know how to prospect and generate business. However, sometimes the points outlined are easier said than done. That is what this section is for.

    I can't get new carriers for my agency. What should I do?

    Carriers are picky in who they want to represent themselves (in theory) and usually want already-established agencies. Remember the whole problem with "you need experience but no one wants to give you experience" thing when applying for jobs? The same chicken-and-the-egg runaround can happen here as well. Here are some tips on how to get some additional carriers.

    First, I'm assuming you have at least a couple of carriers. This includes Progressive, GMAC, and probably a property carrier like Travelers, MetLife, Foremost, or something along those lines.

    1) Work on your business plan and tweak it so it's very clear, concise, and specific to your agency. Show why your agency is different than others and why the carrier should take you up on appointing a "scratch agency" of less than 3 years experience. Contact your carrier reps and ask for a review and see what they have to say, and go hard for that appointment.

    2) Network with the carrier reps. Carrier reps are the people you need to impress to get an appointment. While some carriers don't let the reps have the final say, some do, and others the carrier rep has a LARGE say in you getting the appointment. Talk to reps during conventions, continuing education and training sessions (like your CIC courses you should be taking), insurance events at The Big I, golf tournaments, or wherever else. Also keep in touch with the carriers and ask them what they are looking for, because you might have it eventually. Don't pester them but make sure they know you want the appointment and make them think of you first when they need more appointments for the following calendar year.

    You can also talk with carrier reps that you worked with in your old agency as a producer and ask for an appointment since they know your ability to produce and the quality of your business. Leverage your experience since they already know you and your ability to work their system.

    3) Generate a larger book of business and roll it to the carrier. In insurance, cash is king. Start with the carriers that you DO have and put business with them and then offer a "book roll" of a larger amount to get the appointment. It's like buying the appointment but you still get your commission. This is common for a lot of large commercial markets, and for very exclusive personal lines carriers as well.

    4) Work with some MGA's (managing general agencies) in your area and write business through them. This has some up's and down's, however. You often get access to "basic" carriers that you might not have, like MetLife, The Hartford, or Travelers, or a few others, so you aren't getting the market-breaking carriers that you might look for. They also will take a cut of commission, and you probably won't have binding authority either, meaning you have to talk to them to write business and make changes rather than you doing it. It's not horrible but not ideal, either.

    5) Check with your industry affiliations and see if they can provide you carrier access. Your PIA and Big I associations first come to mind as they often can leverage you some carrier access either as direct appointments, as part of a cluster, or MGA (which you then book roll to your own appointment after a period of time.) Talk to your reps and see what they have to say, and join SOMETHING for god's sake, you're not an insurance hermit!

    6) Join a cluster or aggregator. This is the most common way people go ahead and get carriers, however it is also a time-consuming process researching the right now. It is VERY important that you make your decision wisely as it might not be possible to take back your decision. Clusters allow you the ability to get multiple carriers, including some heavy-hitters, at reduced production requirements to keep the carriers happy.

    7) Become part of a franchise. This is similar to a cluster or aggregator but you will get more resources and/or marketing, more carriers than a cluster (usually), and you have a large network for support. Some of the downsides include following the rules of a franchise company, not truly being independent, and paying money to be a part of the company. Still, it is a very similar option to your cluster opportunity. Usually a franchise company can be a good idea IF you qualify for them.

    Which cluster should I join and how do I know if I'm making the right decision?

    NO ONE can answer that question but yourself. However, here are some things to keep in mind for your cluster options and see which things are good/bad/deal-breakers for you and address them with your cluster reps.

    AgencyEquity has a good link for a lot of the clusters in your area, as some of them are regional and others are national.

    Clusters are there to make money, just like you are, by marketing their insurance carriers to agencies and keeping the agencies under the cluster umbrellas. Clusters make money by getting overrides on what you write, taking a split of your commissions, and/or charging a monthly or one-time fee. Clusters are all different and you need to talk to them all and see which are good for you.

    Here are a few things to consider:
    1) What carriers can you get right away?
    2) How much money do you lose by joining? Do you have a buy-in like with SIAA? Do you have a commission cut (if so, capped or uncapped each month?) or have to pay a monthly fee?
    3) What other benefits do they offer? Do they give discounts on raters, provide support to the agents, vendor affiliations, lower requirements for profit sharing, or what? You will eventually be able to make a lot more money with a cluster than you are spending, but that is going to depend on the cluster you join.
    4) What is their divorce clause like? Can you roll your book away in the future? Do they have non-competes in place so you cannot pursue the carriers they offer you for 1-3 years after you leave? THIS IS IMPORTANT and you need to know this based on your overall agency plans.
    5) Do you have binding authority?
    6) Who owns the book of business? This is important as well because while you might not be able to pursue similar carriers outside the cluster you might be able to get new carriers, and you can't roll a book from the cluster if they own it and you don't.

    Clusters are VERY helpful but VERY different at the same time. Find out which ones you can reasonably afford and which ones you don't like the carrier access or stipulations for. This is YOUR business and you need to think in the long-term. Do you plan on leaving the cluster in the future, or do you plan to stay with them forever? SIAA is one that many people here swear by for being profitable and will never leave, while others can't get out fast enough. Only you can make that decision.

    Ask the cluster to provide you contact information of a few agencies they service and ask how the agencies like them. See what those agencies say and get a more down-to-Earth answer about what is going on. I do that as being a part of Iroquois and it's helped some people and others decide not to go with them.

    Some of the MAJOR clusters are:
    Iroquois Group
    ISU Group (a personal favorite, if you can afford them)
    Keystone Group (similar to ISU)

    Agencyequity has a good website for this information, but you will find that SIAA is a major player while SmartChoice is good for new agencies on a budget. ISU and Keystone are for people that are looking to turbocharge an already-established agency, or if a company is bankrolling an agency as a pet project. Iroquois, in my opinion, is good for already started agencies as well.

    What Can I Do for Continuing Education and Training?

    Funny you should ask as I am currently undergoing this right now. This is going to vary from person to person, but it depends on what you are trying to do. Some designations are good for newer agents while some are good for those who need formal training to fill in holes, and others are good to put your knowledge to the next level.

    There are two major companies to know about (among others), which are The National Alliance and The Institutes. Here are some of the major ones to look at as an agent or agency owner:

    CIC- Certified Insurance Counselor. This is the first one to get in my opinion. You take 3 days per class for 5 classes, and pass a test for each one. A cheaper designation at ~2k plus travel expenses. You get training on coverages that matter for selling and you are around highly-trained agents who are wanting to learn. This is also where you can meet carrier reps, vendors, and other people getting a CIC. This is a GREAT place to network, learn, and you also can get a discount on your E&O for many carriers. This is the first designation to get. The five courses are L&H, agency management, personal lines, commercial property, and commercial casualty, so you get a good spread of training. If you are really limited in your knowledge, it might be better to start off with other training or another designation.

    CPCU- Chartered Property and Casualty Underwriter. Far more prestigious than all other designations (it is known as THE Gold Standard), the CPCU is 8 classes and takes people a while to learn. I'm pursuing this designation concurrently with the CIC and can say that there isn't a lot of overlap. There is a track for personal lines and commercial lines. I will say that the survey of personal lines insurance covers a lot of material that you see in the CIC, but the rest is more academic than practical as a sales agent. You'll learn things like some accounting and economics, underwriting theories, business law for insurance professionals, and things of that nature. On the bright side, multiple colleges accept these completed courses for undergrad and even graduate credit. If you are on the carrier side, THIS is the designation to get. Similar to the CIC, there are networking possibilities with the CPCU. Being a CPCU at a CPCU chapter is a good way to meet marketing reps and other people that you might want to know, and they have been through the hell...er...training that you have for the CPCU, so they know you are serious. That is how one of my buddies got a commercial appointment.

    ARM- Associate in Risk Management. I haven't spent much time learning this one but the risk management in the CPCU seems valuable so I bet this designation would be useful as well. Agents with a CIC and CPCU (the folks who I learn from in the CIC courses) say it is valuable. Others with the CPCU say that the ARM is more practical knowledge as an agent compared to the CPCU, but they definitely appreciated the CPCU as well. If you are going to be working in large commercial accounts, it will probably be nice. This course is the older, more academic counterpart to the CRM (Certified Risk Manager.) The ARM is 3 courses you learn on your own while the CRM is offered by the National Alliance like the CIC and is mirrored in how it is taught.

    AINS- Associates in General Insurance. This is more for the beginners. It teaches some insurance coverages and insurance basics. It's good for an agent out of the game for a while, for new people who are not familiar with insurance, or for people moving from captive-like places like call centers to the agency side. The courses teach things like basic insurance principles, coverage for personal lines, and coverage for basic commercial. I think this is a great one to have for your CSRs.

    AAI- Accredited Adviser in Insurance. This is the AINS older brother. This designation is more knowledge-intense. There are 3 courses to this as well, with the first course being all 3 AINS courses into one. The second course is "multi-line products" and things not found in previous courses like crime coverage, BOPs, sureties, EPLI, workers comp (more in-depth), garage coverage, specialty products, and more.

    CLCS and PLCS- Commercial and Personal Lines Customer Service (respectively). This is an in-depth coverage designation for personal and commercial lines. The designation isn't expensive, but there are multiple tests. On the bright side, you get a lot of reference books as well. It's not well recognized, if you're into that type of thing, but they look to provide a decent amount of knowledge for someone wanting to learn.

    There are other designations for specialties such as reinsurance, E&S lines, underwriting, accounting, management, and etc. but I'm not a big fan of those. Maybe having one where you specialize would be good, especially in brokerages.

    Eventually you'll have a decent bit of alphabet soup since these things are good to have and they provide CE's, which you need for your license anyway.

    Here is what I would do personally, from noob to more advanced:

    AINS to AAI or CIC (you can do both, though I think one is fine) to CPCU. Supplement with an ARM.

    My teacher in the CIC course recommends doing something like this as an agent:

    CIC and ARM/CRM (don't to both) and then one to specialize. The CPCU isn't going to help out more than just for personal satisfaction (which I agree with) unless you are a company rep, then go for the CPCU right after the CIC and then get the ARM. The ARM will actually provide you one of the courses for the CPCU so it works out well to get them both.

    If you don't like the idea of sitting down in classes for the CIC, go for the AAI. Otherwise, it's probably best to get one or the other.

    Hopefully that helps with questions about designations. Most of the designations aren't going to make you more money but I feel the CIC is the exception. If you are going to get any designation, get the CIC. Designations themselves aren't going to do anything for you, but the knowledge can help you find problems and appear knowledgeable to larger prospects. As Frank put it, "if it makes the agent warm and fuzzy then good for them." If you can do a designation that has networking capabilities, then go for it. This means the CIC, CRM (not ARM), and CPCU.
    Last edited: Nov 7, 2012
  5. nyc2phi

    nyc2phi Well-Known Member

    Likes Received:
    New York
    Very valuable information, eve for someone with experience. You answered a lot of prior threads questions as well as a lot of potential threads.

    My question for you as I am a captive agent looking to go indy,

    1)what has been the biggest challenge for you after you switch?
    2) What has been the best part about the switch?

    I am also interested in iroquois as they have the best option here in NJ/PA, what made you choose them over the others ?
  6. NCAgent

    NCAgent Well-Known Member

    Likes Received:
    North Carolina
    My 2 biggest challenges where these:
    1) Being on my own so no mentor to look after me. It's hard taking responsibility and realizing everything falls on you. If there is a mistake, no one takes the heat but me and the E&O (luckily that hasn't happened.) If there is a question I can't answer, I have to go find it myself, I don't have a mentor to verify with (thank god for underwriters!)

    2) Getting carriers. That is why I'm spending time on the "getting carriers" section.

    I picked Iroquois because they have an escape clause after a certain amount of production and I liked the rep. My agency is uniquely built where we had major carriers already but we operated in multiple states. Because of operating in multiple states we needed some state-specific carriers pretty sorely but not enough yet to justify a direct appointment. That is where Iroquois helped us excel the most. Eventually I'll roll everything to them for profit sharing and then to escape if necessary, though I don't think I'm leaving them anytime soon.
  7. NCAgent

    NCAgent Well-Known Member

    Likes Received:
    North Carolina
    Fair, though they ARE coming to a board and talking to anonymous people all over the country, who may or may not even be insurance agents. What's one more person? I mean, they don't have to read what I post, I'm not going to get upset or take offense if they don't. Hopefully if there is an error here someone is going to correct me. It's an internet forum, you get what you pay for!

    And apparently some people are reading it with the views thus far. It's not done yet. I'm just tired of seeing the same questions over and over and got bored one day after having some teeth removed.
    Last edited: Nov 5, 2012
  8. iiinycboi

    iiinycboi Well-Known Member

    Likes Received:
    New York
    great thread, i was working on one to give back to the community at 1000th post. guess you beat me to it.

    mine was based on indy start up and the process. pretty similar but not as in depth as yours.

    thanks for the valuable info! i think the biggest thing for indy is to generate leads and x date non stop.
  9. NCAgent

    NCAgent Well-Known Member

    Likes Received:
    North Carolina
    It's a perfectly legit concern. I thought about making a section for it but got too lazy. And I made it long but if someone isn't willing to read through all that then I guess they aren't going to be a good insurance agent after all...

    Thanks for asking that, RBA, feel free to ask anything else (like you needed my permission :D)
  10. Lemingaj

    Lemingaj New Member

    Likes Received:
    Wow! A great read for people like me getting into the industry. Since I am a new then I need to go find a local agency to for for for a few years...

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