Opening a Brokerage - Startup Advice

[STC1991]

Hi All!

I have been in the commercial insurance industry for about 4 years as both a licensed P&C broker and risk manager for global construction company. I am now working towards opening my own commercial insurance brokerage. Within the commercial insurance realm, my expertise definitely lies in construction risk although I am knowledgeable on most casualty products.

There are several threads that address similar questions to the below so I apologize in advance if this seems 'redundant'!

My largest concern is actually being able to produce competitive quotes as I will not be able to receive direct appointments (until I build out the book).

1. What is your experience with MGA's as a means to reach admitted markets without direct appointments?
2. In general, are wholesale brokers open to working direct with a small brokerage or do the E&S markets function similar to admitted in needing an MGA to facilitate business? Construction is tough to insure in NY so E&S markets seem to thrive for this type of business.
3. I assume surety would also have to flow through an MGA?
4. What is typical fee/commission percentage taken by MGA when placing coverage?

THANK YOU for your help and input!

 

[rgleyzer]

I started my agency 7 months ago. Best of luck to you and congrats! Although I was about 12 years in before I did it.

1. Do it. Join an agency cluster if you have to. Steer clear of anyone that requires a buy-in or a % of your business after you try to get out. Just find ones that are willing to take % of your commission, 30% is reasonable. Greedy MGAs have taken 50% (WAY to high).

2. Totally. just find the right wholesaler. Some have minimums, some do not. Meet with local ones and buy them a coffee, they'll appreciate it. You can also find out who the wholesalers are by contacting the carrier directly and simply inquiring through who you need to go to get access.

3. Haven't tried them myself, but try SuretyOne.com seems like they can do it all when it comes to Surety.

4. 30% as mentioned above, but could be higher.

 

[STC1991]

I started my agency 7 months ago. Best of luck to you and congrats! Although I was about 12 years in before I did it.

1. Do it. Join an agency cluster if you have to. Steer clear of anyone that requires a buy-in or a % of your business after you try to get out. Just find ones that are willing to take % of your commission, 30% is reasonable. Greedy MGAs have taken 50% (WAY to high).

2. Totally. just find the right wholesaler. Some have minimums, some do not. Meet with local ones and buy them a coffee, they'll appreciate it. You can also find out who the wholesalers are by contacting the carrier directly and simply inquiring through who you need to go to get access.

3. Haven't tried them myself, but try SuretyOne.com seems like they can do it all when it comes to Surety.

4. 30% as mentioned above, but could be higher.

Thanks for the great reply and hope your business if off to a positive start - very informative as I navigate this process. What were some of the unanticipated difficulties you have faced when opening up shop? I am sure there will be many for me!

 

[STC1991]

Thank you and I hope your business is doing well! I really appreciate your feedback - this is very helpful.

What were some of the unanticipated difficulties that have experienced in starting your agency? What is your best method for generating leads?

 

[insurance1822]

I don't know much in this realm, but I do have a friend who writes large commercial accounts. He's a producer at a massive brokerage where he's 50% new 25% renewal. The renewals split does stink...but that being said he has access to tons of massive programs, in house account managers, in house loss control teams, in house claims staff etc. If you were getting the full renewal & had to source all that infrastructure, what would you really net anyway?

Just food for thought. He's also been able to buy in b/c he's built a 8MM book over 7 years.

 

[rgleyzer]

So I'm obviously facing different types of difficulties that someone who is looking to provide full fledged risk management programs for large Fortune 1000 organizations. I'm targeting middle market and specialty business (particularly those with high WC).

The challenges I've faced are carrier appointments as I mentioned in my original reply.

I'm just getting to the stage where I need to deploy an agency management system (give NowCerts a try if you want a good system that is also affordable). Before I was able to do everything manually and didn't want to pay for an AMS until I had some client flow. Don't do this too late, otherwise you'll find it difficult retroactively inputting client data for past several months.

And something that I found very frustrating when going on my own was that not all my emails were getting through to intended recipients... this was a crazy concept as I've always worked for large organizations and never had this problem. however when you are on your own, you are probably sending solicitation type email, inevitably you'll send some. this may lead to you getting blacklisted. So just tread lightly here. Big a credible email providers - I'm on Outlook now. When sending out emails on a large scale, look into various service providers that can help do this so that you are not directly impacted if emails bounce.