P and C Masters: Really Own Your Biz?

[HealthGuy]

Comments, private messages, opinions please...I am narrowing down two P and C clusters and evaluating the contracts very closely..SIAA vs. Smart Choice. I know other posts on the forum (including mine) address the differences intimately, but I wanted to explore one point of contention between the two contracts: OWNERSHIP.

SIAA: Technically you own "direct" contracts through SIAA to the P and C companies and get paid direct from the companies and then cut SIAA their percentage back. However, if you ever want to sell your agency, you owe SIAA 30% of the value of your book, regardless of who you sell to, on the way out the back door. Is this truly ownership or a tight leash? The contract is also very restrictive on expansion of storefronts, etc. You need permission to virtually do anything from SIAA before you even think about it.

Smart Choice: You are technically writing under Smart Choice and they pay you after they take their cut. You can sell your "book" of clients to anyone you want to, with Smart Choice right of first refusal plus them sweeting the offer to you by 5% or 10% depending upon your production.

Really, both contracts are very restrictive in their own way. Why does "ownership" in this business seem to be a pipedream...Seems as regardless of how agents want to write we are always at the disposal of who we sign up through.
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To be fair, an additional comment..The SIAA agents I have spoken with seem to be fixated on "ownership" of their own book, but I think the SIAA contract sucks...From the 10K buy in, to the "promise" of production bonuses that may or may not materialize, to the monthly ongoing fees (that never go away)..At least with Smart Choice they cap what you owe to them every year at 15K...Really, really...Is it that important to be paid "direct" from the carriers as SIAA says...You leave SIAA you still have a two year non compete with their carriers anyway, how is that ownership even if you are paid direct?

 

[djs]

What does ownership ever mean in the insurance world?

Heck, what does it ever really mean?

If you own a house, with a mortgage, you are free to do whatever you want, oh, except tear it down because the mortgage doesn't allow that, or build on to it without permission from the city and zoning laws. Can I paint it pink? Probably not, the HOA will come after me. But hey, I 'own' the house, right?

Ownership always has some encumbrances and potentially a few right of ways through the property or the contract. As in health, clients are always free to leave, cancel, change, whatever. There really is no 'ownership' in the way we all would like to have it.

In insurance, you NEVER own the client, they are people. You 'own' the renewals. With luck, you own the right to sell those renewals.

I know very little about SmartChoice and not a lot about SIAA, though I've looked at them to get access to some carriers. I forget why I passed on SmartChoice early on, but the forever fees with SIAA seem like a tough pill to swallow, though in fairness, it may still be economically advantageous for me to do it.

Good luck!

Dan

 

[HealthGuy]

Dan great post and perspective...thanks.

 

[redsquash]

SIAA charge around 8-10k upfront and promise "better" commission (what ???). Smart Choice has harsh restrictions if you ever want to move out.

Have you looked into Insurance Noodles and Superior Access. I had contract with Superior Access at one point of time, when I started insurance sales. Their website is good, but service sux. I dont do P&C anymore, but Superior Access still is paying me the renewal commission on the policies I wrote.

If P&C will not be your core business, then I find it hard to justify 10k upfront to SIAA.

 

[HealthGuy]

Red...yes looked into the other two...they dont let you bind thus my hesitation with them.

 

[djs]

I should add....

I can't speak specifically for SIAA, but they clearly have an interest in you growing your business (as does SmartChoice). Effectively, your cluster is your business partner. Anytime you have anysort of (decent) partner, there will be benefits of the partnership, but along with it, a bit of headbutting. Great partnerships are designed to do this.

So, you want to make a major change in your agency. You have to run it by your business partner, they have input. You have to remember they will provide a perspective that you may not have thought about yourself. This input may save you a major mistake, even if you don't see it initially. It might make you improve your plan because of some extra perspective. It might make you butt heads and make you hate your partner for a while. All depends.

In general though, they have no reason to discourage you from doing things that will increase business, unless it violates other agreements already in place. For instance, maybe you want to send out a bulk email blast (called spam by most) and in the carrier contract there is a statement that doesn't allow this, they will likely say no, if it mentions that carrier at all. (note: this is an example only, not advocating sending spam).

Dan

 

[HealthGuy]

Dan: All great points..SIAA wants to tell you where to expand so you don't bump into other territories, geographically of other SIAA agents..that is primarily why. They contract with others, potentially around you and they dont want their subs being too close. Again, seems like they tout independent contracts, but they tell you what to do....Maybe Superior Access and the Noodle are good enough to write through right away, I don't know..but the vets on the forum seem to think that binding on the spot is key, but others say its not that big of a deal because better clients don't need binding on the spot anyway, so who knows. The P and C world seems like such a cluster F of opinions. I am afraid of contracting with anybody, so the Noodle and Superior Access seem safe, but workable for the long term - probably not. I'm trying to make a thoughful decision apart from the stupid SIAA 10K fee. I know agents that cap out thru Smart Choice, pay them the 15K per year and are very happy...While other SIAA agents never stop paying them on earned commissions...seems like even with the contingencies you can earn through SIAA, you still end up paying them (after the difference) if you have a well oiled agency much more potentially than 15K per year...What a ripoff it seems.

 

[Guest]

WOW, first of all, didnt you sign a confidentiality agreement? you are opening your mouth ALOT about a contract you shouldnt be yapping about.

Second, about the fees, call the carriers yourself and try to get appointed, NOT GONNA HAPPEN.

there are some carriers that will NOT put on new agents unless they are members of certain clusters, so that should tell you something, their system works.

The bonuses/overrides/extras that some clusters create for their members, BY FAR outweighs any entrance fee.

The optional training that is offered, the extra benefits I get, the NEVER hearing from the master agency is AWESOME.....

Remember, the cluster has the relationship with the carrier, thats why they want first right of refusal upon selling it, they just want to qualify that new person, as for the % they want at sale, make the buyer pay it.

Tell you what thou, you best be careful of what you say in public about any clusters

 

[HealthGuy]

Red: Havent signed with anybody yet, just looking for help not a scolding. And no, the bonuses dont all the time outweigh the entrance fee...I spoke with a guy with SIAA who told me he earned in 2010 about 275K in raw commissions with SIAA, paid back to them in fees about 25K in 2010 and only earned 13K in bonuses, so his net payment to SIAA was still about 11K (not including their 10K buy in which is a cost, over time). If he would have been with Smart Choice, he could have earned the 275K in commissions, capped out the payback to Smart Choice at 15K and been done with it, oweing Smart Choice nothing if he wants to sell (the 30% and more SIAA requires out the back door back to them if you sell)...So whos contract blows? SIAA or Smart Choice? More opinions please, not lectures.

 

[Guest]

SIAA does NOT tell you where you can put an agency, they just try to spread them around more so you dont have agents on top of each other,

SIAA all has local MA's that know their area, so my MA goes out and gets us new carriers that are COMPETITIVE in my area, yes, we have national contracts, but we also have local deals with carriers.
SIAA I can also go get other carriers that arent part of SIAA, which is a BIG DEAL.