Insurance Producer Questions

[Martilyo]

I have been searching this forum about this topic and can't seem to find the answers I am looking for. I have been given an opportunity to be a P&C commission only producer in a new (4 year old), but growing independent agency. The agency owner is allowing me to work around my current work schedule until I am able to transition to insurance full time. I will be a 1099 contractor with no benefits other than being placed on his E&O insurance and using his rating software...etc. I will provide my own leads. The commission split on new and renewals is above average, according to the forum searches I have done. My eventual goal is to have my own agency. This is either by buying a preexisting book of business, buying an established agency, or perhaps buying into his current book and becoming a partner. (this has been brought up, but not been discussed) I believe I will have to sign a 2 year non-compete agreement. Now, to be fair, I would like to be able to keep the book of business I worked for, however, I want it to be fair for him as well. Before we do business together, I want to make sure we agree to terms and there is no misunderstandings. What would you consider fair for the both of us if I want to take my book of business with me once I am ready to open my own agency? Perhaps buy out my book for 1X the commissions? After all, he is the one that is providing the E&O, the appointments and software. Should I form an LLC and do business with him through my LLC since I will be a 1099? Thank you for listening to my ramblings...

 

[thomasm]

I have been searching this forum about this topic and can't seem to find the answers I am looking for. I have been given an opportunity to be a P&C commission only producer in a new (4 year old), but growing independent agency. The agency owner is allowing me to work around my current work schedule until I am able to transition to insurance full time. I will be a 1099 contractor with no benefits other than being placed on his E&O insurance and using his rating software...etc. I will provide my own leads. The commission split on new and renewals is above average, according to the forum searches I have done. My eventual goal is to have my own agency. This is either by buying a preexisting book of business, buying an established agency, or perhaps buying into his current book and becoming a partner. (this has been brought up, but not been discussed) I believe I will have to sign a 2 year non-compete agreement. Now, to be fair, I would like to be able to keep the book of business I worked for, however, I want it to be fair for him as well. Before we do business together, I want to make sure we agree to terms and there is no misunderstandings. What would you consider fair for the both of us if I want to take my book of business with me once I am ready to open my own agency? Perhaps buy out my book for 1X the commissions? After all, he is the one that is providing the E&O, the appointments and software. Should I form an LLC and do business with him through my LLC since I will be a 1099? Thank you for listening to my ramblings...

Just take it the job!

Learn everything there is to know about quoting and binding from him and consider it paid tuition when you go out on your own in two years.

Besides, the most important thing you should be focusing is HOW you're going to provide your own leads.

Your ability to self generate leads on a consistent basis is way more valuable than any book of business you happen to leave behind.

 

[cottonland]

As an agency owner, i would not sell yur book for 1X commissions. I would allow you some ownership after a pre determined period. Additionally, if this was just going to be for 2-3 yrs, i would probably pass anyway and look for someone that was interested in a long term situation.

For me to put my E&O on the line and all of the indirect expenses of adding a short term producer, you would have to produce 800k-1.2m per year in commercial premium.

 

[Martilyo]

Just take it the job!

Learn everything there is to know about quoting and binding from him and consider it paid tuition when you go out on your own in two years.

Besides, the most important thing you should be focusing is HOW you're going to provide your own leads.

Your ability to self generate leads on a consistent basis is way more valuable than any book of business you happen to leave behind.

Not sure where the 2 years you mentioned comes from. I will probably stay with this IA for at least 5 years if not longer. However, if I am going to vest the time, I would like to have some ownership in my book I create. I would not want to start over from scratch.

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As an agency owner, i would not sell yur book for 1X commissions. I would allow you some ownership after a pre determined period. Additionally, if this was just going to be for 2-3 yrs, i would probably pass anyway and look for someone that was interested in a long term situation.

For me to put my E&O on the line and all of the indirect expenses of adding a short term producer, you would have to produce 800k-1.2m per year in commercial premium.

That is understandable, but I never mentioned anything about staying for just 2 years. I plan to be on board for at least 5 years minimum. How much ownership would you allow for what kind of time frame?

 

[cottonland]

I simply said 2-3 yrs if it was going to be a short term arrangement. If you are talking a minimum of 5 yrs, I think that is something the owner needs to know. I see a lot of comments on here along the lines of "just stay there for a couple of years then go out on your own" I think that is bad advice as well as unfair to the agency that is giving the opportunity. Many do not realize the indirect cost associated with producers, not to mention opportunity costs.

My philosophy is simple...... It has to be a good arrangement for everyone involved. If it's not then one party needs to walk away.

Personally, there are several factors that come into play regarding a vesting schedule. Experience, work ethic, ability to hit goals as well as one's overall desire to build something. That being said, I would require a minimum of 3-5 yrs before any type of ownership was granted. Then I would allow an increase in that % each year or every other year, till a maximum of 50% was owned. If at some point in the future, you decided to leave, you could buy the remaining 50% at a pre determined factor.

It sounds like the agency is being fair with you, from what I've read. Just explain your desires to them and structure a deal that you think is fair for all parties involved..... If you would like to discuss further, feel free to PM me.

 

[Martilyo]

I simply said 2-3 yrs if it was going to be a short term arrangement. If you are talking a minimum of 5 yrs, I think that is something the owner needs to know. I see a lot of comments on here along the lines of "just stay there for a couple of years then go out on your own" I think that is bad advice as well as unfair to the agency that is giving the opportunity. Many do not realize the indirect cost associated with producers, not to mention opportunity costs.

My philosophy is simple...... It has to be a good arrangement for everyone involved. If it's not then one party needs to walk away.

Personally, there are several factors that come into play regarding a vesting schedule. Experience, work ethic, ability to hit goals as well as one's overall desire to build something. That being said, I would require a minimum of 3-5 yrs before any type of ownership was granted. Then I would allow an increase in that % each year or every other year, till a maximum of 50% was owned. If at some point in the future, you decided to leave, you could buy the remaining 50% at a pre determined factor.

It sounds like the agency is being fair with you, from what I've read. Just explain your desires to them and structure a deal that you think is fair for all parties involved..... If you would like to discuss further, feel free to PM me.

Well said. I totally agree. I would never expect more than what is fair and what is agreed by myself and the agency owner. Thank you for your input.

 

[marindependent]

What is the commission split exactly? And how do you know its Fair?