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.