Forming Independent Agency - Need Insight Into The Process

Discussion in 'Getting Started Selling Insurance' started by dr00t, Aug 27, 2008.

  1. dr00t
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    dr00t Member

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    Hi Everyone. I have been reading through this forum since joining today and can only hope to have my questions finally answered after weeks of researching to no avail.

    First, let me start off by telling you all about myself really fast...

    I am not an insurance agent. However, my dad is. He's been in the business for several years and works for an independent agency as a "commercial lines producer". Recently, I raised the question of starting his own independent agency. His responses to WHY he is reluctant to starting his own independent agency are what led me to this forum seeking answers.

    1. He believes that establishing contracts with carriers is very expensive and time consuming. I believe there MUST be an easy way to do this... Can some of you please provide some insight into this process. With exception to application fees, are there really some major costs involved with gaining carrier contracts or is my dad just simply wrong?

    2. He also believes that if he applies with the carriers during the start-up process of his agency, some word will leak back to his current employer and all hell will break loose. Is there some protocols in place to prevent this from happening or should he end employment BEFORE applying for carrier contracts? What do you all recommend?

    3. I am aware that he signed something with his current employer regarding non-competes with his book of business. If he honors that, but a client insists on following my dad to his new business... is there anything the employer can do or is he safe? My father is a very trustworthy person and would never maliciously harm his former employer by intentionally violating any contract he has with them. I just want to know what some of your thoughts on this are and how he should handle it.

    I have a bunch more questions, but I think these three are good to start with. Thank you in advance to anyone willing to help answer these!
     
  2. moonlightandmargaritas
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    moonlightandmargaritas Well-Known Member

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  3. dr00t
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    dr00t Member

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    Well, I guess I don't quite understand what he is right about?

    I mean, how can so many agents start or create their own independent agencies if the barrier is supposedly so high? I think the barrier has lowered in the past 10 years, based on my observations. Maybe I am wrong.

    I still need some additional insight into the three questions I have posted above.
     
  4. moonlightandmargaritas
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    moonlightandmargaritas Well-Known Member

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    You are wasting time.

    He is right about ALL of it. It just depends if you have the wisdom to listen to it.

    You are wrong. The barriers to entry ARE higher.

    You strike me as the type that will keep asking questions until you get the answers that you want to hear...
     
  5. joshril
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    joshril Well-Known Member

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    1. Contracting can be time consuming and appointment fees vary depending upon your state...
    2. He will probably be fired if his employer finds out he's jumping ship. Contracting should be done after he leaves unless he doesn't care if they fire him...
    3. Many non-competes are hard to enforce. If he actively attempts to move his book of business, he will likely be sued. If a client calls him, and he moves them to a product that is better, it is unlikely a judge would penalize him, but he could still be sued, spend money on legal fees, and is in violation of the non-compete.
     
  6. dr00t
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    dr00t Member

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    Look, I came here asking for explanation... not just a simple "He is right". If it does cost money, how much? We aren't BROKE. My family has money for a start-up operation but I am doing the leg work to see how much, or if anyone has any info on WHERE to start looking.

    I cannot even find a number to call on any major carriers to inquire about their application process. If you have that info, it would help.

    You strike me as the type who never explains anything, and it leaves me wondering why you even spend time on a forum that is meant to SHARE information... - not just provide one-line answers.
     
  7. dr00t
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    dr00t Member

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    Alright. Thank you. Finally someone who offers more than a four word response.

    Can anyone provide me with a starting point on the contracting process? I cannot seem to find any resources regarding this vital step in forming a new agency.

    The state is Indiana in case that helps.
     
  8. joshril
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    joshril Well-Known Member

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    I don't know what carriers are big in the commercial market in Indiana, but get with your Dad and find out. Contact the carriers and ask about requirements (E&O, appointment fees, etc.). I do know E&O will not be cheap for a commercial insurance operation, but it sounds like you may have the funding necessary.

    Other things to consider:

    How the business will be structured for tax purposes
    How much cash will be needed until the business is profitable
    How the agency will gain new clients (marketing, leads, etc.)
    How much cash is needed to get the business off the ground (Marketing costs, E&O, computers/software, office space, etc.)
     
  9. moonlightandmargaritas
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    moonlightandmargaritas Well-Known Member

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    Four posts, and all of a sudden you're qualified to dictate what kind of responses you get, as well as what the forum is for?

    Good luck. You'll need it.
     
  10. joshril
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    joshril Well-Known Member

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    Another thing to consider... If your Dad intends to be appointed with carriers he is currently selling, make sure and ask about releases and if he can move his contract... This could get a little hairy...
     
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