How much should I pay to buy my book of business?

[Insurance Girl 11]

I am a new Commercial Insurance Agent. I will be working with a boutique commercial insurance firm as an independent agent. They are not providing any type of leads at this time. My business will come from my contacts over the years and grinding away. I want to ensure my agreement with the agency spells out how I will be able to take my book of business in a fair & equitable way should I decide to leave, retire, or start my own agency. I would truly appreciate any and all input ASAP as time is of the essence.

If there is anything else you have learned from experience that should be included in the contract I would appreciate that info as well. Thanks in advance!

 

[marindependent]

You have said that you are a "new commercial insurance agent", but are you a "new agent" and "new to insurance"?

Frankly I think the best answers will depend on how you respond to this question.

 

[Markthebroker]

For someone in your position, setting the value of your book at 1x to 1.5x of annual commissions, with you owning half the book, and them owning half, is pretty fair.

 

[Insurance Girl 11]

Thanks, marindependent. I am a new agent. I am not new to the business world and I have an extensive background in sales and management.

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[Insurance Girl 11]

For someone in your position, setting the value of your book at 1x to 1.5x of annual commissions, with you owning half the book, and them owning half, is pretty fair.

Thanks, Mark. Given the fact that I am a 1099 working from my home office do you feel the value you mentioned is fair? Also what do you think a fair commission split is given I'm straight commission with no benefits, expenses, etc.?

 

[Markthebroker]

I am commercial only, and that is how I started. I had very little experience when I started, and I assume your situation is the same. Really the only difference is that I was in the office.

Keep in mind that the risk to the office, including e&o, as well as training is enormous. As I mentioned, I am a commercial only broker. It took me about five years to get a solid handle on it, and a few more years to get really really comfortable with it. Underwriters are in training for up to five years before they become an underwriter, and they don't handle the breadth usually that we do.

Like most new independent producers, as well as myself, you are the most concerned about your commission split, and book ownership. These are not the two most important things when you are starting, though you probably think they are.

The cold hard reality is that most new Independent Producers will not make it. Personally, I spent hundreds of thousands of dollars supporting myself while making next to nothing, while I got up and running. For that reason, the most important things you are going to want to look at are training, and the servicing that the support staff will provide. The reason is, you'll be bleeding money like crazy for the first few years, so if you bleed slightly more, or slightly less, it doesn't matter much. And, if you're like the majority that don't make it, it doesn't matter that much what your book is worth.

But that said, a fair split is between 30 and 50% new and renewal.

 

[marindependent]

Thanks, marindependent. I am a new agent. I am not new to the business world and I have an extensive background in sales and management.

I think that when you are new to the specialty and especially new to insurance you, obviously, you have much less leverage in the negociations. And in my opinion the splits that you deserve should differ.

Best of Luck in your Endevours.

 

[Insurance Girl 11]

I am commercial only, and that is how I started. I had very little experience when I started, and I assume your situation is the same. Really the only difference is that I was in the office.

Keep in mind that the risk to the office, including e&o, as well as training is enormous. As I mentioned, I am a commercial only broker. It took me about five years to get a solid handle on it, and a few more years to get really really comfortable with it. Underwriters are in training for up to five years before they become an underwriter, and they don't handle the breadth usually that we do.

Like most new independent producers, as well as myself, you are the most concerned about your commission split, and book ownership. These are not the two most important things when you are starting, though you probably think they are.

The cold hard reality is that most new Independent Producers will not make it. Personally, I spent hundreds of thousands of dollars supporting myself while making next to nothing, while I got up and running. For that reason, the most important things you are going to want to look at are training, and the servicing that the support staff will provide. The reason is, you'll be bleeding money like crazy for the first few years, so if you bleed slightly more, or slightly less, it doesn't matter much. And, if you're like the majority that don't make it, it doesn't matter that much what your book is worth.

But that said, a fair split is between 30 and 50% new and renewal.

Thanks for your input Mark. I appreciate your candidness. I am not like most & I am going to make it! I am also concerned about what is fair regarding my book of business should I decide start my own agency or sell/pass my book along when I retire. How much of my book should I own initially? They want a buyout if I leave. What is fair and equitable in the event that happens?

As for the training it is a small firm with no formal training. However the owner has been in the business a long time & is very knowledgeable. He has provided guidance & suggestions. I do not need sales training but I would like to shorten my learning curve with the insurance aspect. He is great about answering my questions.

Thanks again! I truly appreciate the opinion of a guru such as your self.

 

[Insurance Girl 11]

I think that when you are new to the specialty and especially new to insurance you, obviously, you have much less leverage in the negociations. And in my opinion the splits that you deserve should differ.

Best of Luck in your Endevours.

Thanks for your input! I appreciate it.

 

[Markthebroker]

Thanks for your input Mark. I appreciate your candidness. I am not like most & I am going to make it! I am also concerned about what is fair regarding my book of business should I decide start my own agency or sell/pass my book along when I retire. How much of my book should I own initially? They want a buyout if I leave. What is fair and equitable in the event that happens?

As for the training it is a small firm with no formal training. However the owner has been in the business a long time & is very knowledgeable. He has provided guidance & suggestions. I do not need sales training but I would like to shorten my learning curve with the insurance aspect. He is great about answering my questions.

Thanks again! I truly appreciate the opinion of a guru such as your self.

It's still the same answer.

Just so you know, the owner is busy writing business. What I have seen in the past in multiple occasions, is that the owner will be willing take time away from writing business to help his new hire. If that new hire doesn't start writing business quickly, or pickup the information quickly, he will start pulling away and focusing on efforts that do turn into business, especially if that trainee intends to leave with their book, leaving him no benefit for his time invested, and time taken away from his clients.