Average Length of P&C Insurance Policy?

[WesMantooth]

Hi guys,

New to the forums and newly licensed property and casualty insurance agent. At the moment, my main gig is selling residential real estate. I decided to get into P&C as it is a very natural transition for me, and I don't want to spend the rest of my life hunting for every meal. I have made my decision on the independent broker I am going to hang my license with, as he has a total of 14 CSR's to handle all of the back end work for me, so that I can focus primarily on selling.

The broker has offered me two options, 50% first year commission with 30% on renewals, or 45%/35% respectively. It seems like a no brainer to me to go with the higher renewals, but if people are shopping carriers every year, then it would be counterproductive. I was hoping some seasoned agents could provide insight to me on how long they maintain most of their policies? I'm sure it varies from property to property, but if the average is 3+ years, it would be stupid not to go with the higher renewal percentage. Thanks in advance!

 

[OKCinsurance]

Congrats on the career move! The average life of a customer has too many factors to list but the main factor is a non-standard vs a preferred deal. If you are mostly writing non-stadard auto insurance (a person with no prior auto insurance for whatever reason) you will be extremely lucky to have them insured still in 1 year. Let alone dealing with all their billing issues in the meantime. A preferred deal to me is writing their home and auto insurance as a bundle- doesn't matter if its a $60k home or $1 million home...both are preferred deals and the $60k home client can turn out to be a much better client than the $1 million home account and don't believe any agent that tells you otherwise. I experience this situation all the time. If they are a homeowner (in Oklahoma) they will most likely already have auto insurance and be open to bundling. Only write "preferred deals" take the higher renewal commission and let the other agent in the office write the non-standard stuff that will cancel in 6-12 months. You have to provide excellent customer service after you write the client and they will stay with you 4+ years. The non standard auto will be tempting to write due to the higher premiums but its not worth it in the long run. You eventually wont be able to grow your book and will deal with issues all day.

 

[adjusterjack]

The broker has offered me two options, 50% first year commission with 30% on renewals, or 45%/35% respectively. It seems like a no brainer to me to go with the higher renewals, but if people are shopping carriers every year, then it would be counterproductive. I was hoping some seasoned agents could provide insight to me on how long they maintain most of their policies? I'm sure it varies from property to property, but if the average is 3+ years, it would be stupid not to go with the higher renewal percentage. Thanks in advance!

My own lifelong philosophy has been to get the money now and let later take care of itself. You might not even be around next year.

Also keep in mind that P&C carriers typically pay 10% to 15% commissions. If you write a $1000 annual premium $100 or $150 is coming in the door and, at 50% you're getting $50 or $75.

I'd go for the 50% in a heartbeat.

Next year (if you are still in the business) you'll be writing new business. You'll be collecting on renewal business with a lot less effort.

 

[djs]

Hi Wes! I like your thinking, but reality is different. I haven't heard statistics recently but a few years ago, monoline business had a life expectancy of 18 month and multi-line business about 48 months. This doesn't mean you lose the client, just that you have to re-write it for whatever reason. It would probably be a pretty close wash either way.

But, the real reality is that most realtors turned insurance agents have a career expectancy of about 6 months. For this reason alone, its worth taking the higher commissions upfront.

Dan

 

[BADTROUT]

Ask yourself if you are an entrepreneur or developer of business or a great listener and are better at taking direction... i.e. a follower of a system.

Entrepreneur: Higher NB Commission
Business Developer: Higher NB Commission
Follower: Higher RB Commission

Here is the reality you will face... With no direction as you are first starting, Dan is right, 6 mos... or even worse, 12 mos. (yes, I did mean to say that).

I you have drive, a stubborn nature and you are an entrepreneur at heart then take the higher commission because being caged at 30-50% is going to get old, and you will plateau likely within a couple years, and start wondering abut running your own shop.

If you are a great follower, then you will do well in the long run with higher renewal commission... because you likely wont get antsy and entertain the notion of your own agency.

In other words, only you know you, but if you have ANY inclination of running your own agency... use this as a steeping stone, take the higher amount up front, and start your planning! Good luck!

 

[WesMantooth]

Thanks for the solid responses guys. A lot to think about beyond just how long the policy will remain in effect.

I understand the quick turnover, particularly for RE agents. I'm not here to tell anyone why I will be the exception and not the rule, but I do appreciate the input. I must say I'm very surprised that most of you seem to lean toward taking higher first year commissions, in my head I was expecting the overwhelming majority to push for higher renewals.

If I plateau with the agency, I plateau and I'm ok with it. The broker offered me the option (in my contract) of buying my own book of business out if and when that seems like the best option.

Thanks again for the help. A lot to think on.

 

[BADTROUT]

Best of luck to you Wes... Oh... there is one last thing at the risk of sounding cynical... looking at your quote below... you may have the discussion with him what the selling price would be for you to buy out... and work that into the contract. I've seen so many misunderstandings and "I thought you meant" situations that could easily have been avoided with some solid contractual dialogue beforehand. Either way, its a good start to a great career with the right attitude!

If I plateau with the agency, I plateau and I'm ok with it. The broker offered me the option (in my contract) of buying my own book of business out if and when that seems like the best option.

 

[WesMantooth]

Best of luck to you Wes... Oh... there is one last thing at the risk of sounding cynical... looking at your quote below... you may have the discussion with him what the selling price would be for you to buy out... and work that into the contract. I've seen so many misunderstandings and "I thought you meant" situations that could easily have been avoided with some solid contractual dialogue beforehand. Either way, its a good start to a great career with the right attitude!

Should have mentioned, he said it would be for the cost of 1 years commissions (in the contract)

 

[marindependent]

Best of Luck