Planning my Insurance Career, Open to Advice!

[MikeyR]

Hi Guys first post, so please excuse me if I mess anything up I don't have a complete understanding of terms yet. So let me start off by saying I have 0 experience in insurance but I do have a lot of love and passion for finance, banking, investments, and insurance so everything I know right now is from research and books!

I am currently 20 years old finishing my 2nd year at community I originally wanted to go into Corporate Finance, than switched to Financial Planning, but now have a really big interest in Insurance with particular end focus of opening my own agency. So I will be finishing my third year of community in Spring of 2020 and than transferring to a state school in LA, California with a major in Finance with a focus in Insurance/Financial Planning depending on the school that I get accepted into. I realized that since my end goal is to own my own that private schools will provide little benefits other than networking to a certain extent since I don't plan on going the traditional corporate route.

I have had 3 years of work experience at Trader Joe's which is a pretty respected grocery store I currently make 16.8 an hour with some awesome benefits but I would really like to start get some experience working at an independent agency.

My plan is that in Fall of 2020 I will start the process of getting my property and casualty license and than starting in the spring of 2021 I will look for a brokerage hiring entry level insurance position I want to serve three years there so I can get a good idea of all aspects of the ex software, the expectations, and things to avoid/do.

In which 2024 once I have graduated from school I will set out on building my own agency with whatever comes my way but my end goal is to deal with mostly small businesses in the area. Now I am assuming a 10% average commission I know this varies but I am just using this to keep numbers clean, my plan is to hit 3,000,000 in premiums before I take on any staff would it be best to bring on a CSR (They are the people that service right?) or another sales agent?

After my business is sustainable I want to acquire another small book of business of P&C to help expand and build my book so that I can eventually switch from a cluster and get my own direct appointments. I would like to eventually build an Eco system and offer Health/Life and build a financial services/planning part to my business again easier said than done I understand this is all very difficult and chances of failure are high but please humor me.

Some questions!

1) I have done some research and this is the monthly expenses that I have come up with for a one man agency, I was hoping if people could poke holes in this estimate!

Office Expenses
Rent $ ???
Website $40
Cluster $800
Internet + Office Phone $80

Total Office $920

Software
Pipe drive $100


Insurance
E & O $??
General Liability $50
Workers Comp $30
Business Loan
Total Monthly Insurance $130

Grand Total $1,330

This doesn't include Rent/ E&O Insurance, I was wondering if somebody could give me a ball park number for a new agency on E & O!


2) What does compensation look like on average?
I am just gonna assume that it is 10% for property and casualty will it get smaller each year? I have noticed that there is a difference between renewals and new business which I guess makes sense, but I have also noticed that people have mentioned receiving a "profit sharing" or "bonus" from the companies based on various metrics is that a flat amount or a percentage of premiums as well.

3) Does health and life commissions work the same as P&C?
Is it all just a monthly amount or is it a one time payout? I have heard these commissions are quite higher so I assume there is some cons that come with them other than the fact they are harder to sell?


3) For you Agency owners what are things you wish you knew/planned for?

4) When Compensating agents what do you provide them with? Hourly with Bonuses? Or Just Purely Commission?

5) Are The insurance designations worth getting?

Thank you all for reading!
Any advice is welcome, please don't feel obligated to answer all of them!

Sincerely,
Mikey R

 

[MikeyR]

I remembered a big one that I missed!

When it comes to insurance clusters It seems a lot of people are recommending Smartchoice when it comes to starter clusters but I was reading into Pacific Interstate Brokers they charge a monthly fee + profit sharing commission which considering I didn't even realize was a thing I am not that mad.

My biggest concern is ownership and the ability to control decisions, I notice some people complained about the delay in underwriting and such so I want to try to avoid that.

I saw a couple people recommended looking into AgencyEquity as they have clusters available.

 

[DHK]

3) Does health and life commissions work the same as P&C?
Is it all just a monthly amount or is it a one time payout? I have heard these commissions are quite higher so I assume there is some cons that come with them other than the fact they are harder to sell?

Health has ongoing renewing compensation.
Life and annuities are generally up front payments, depending on the types of contracts you are selling with far smaller renewing compensation (if at all).

5) Are The insurance designations worth getting?

If you're going to get a degree in finance with a focus on financial planning, you might as well get a CFP certification. I am also in Southern California, and the schools I'm thinking of that offer CFP programs are: Cal State Northridge, University of Redlands, UCLA Extension, Cal State Fullerton, and UCI (if I remember correctly). I'm sure there's more, but if you're going to get a degree, you might as well be sure it's "CFP eligible" for their educational curriculum, not just their bachelor degree requirement.

If you're going to be doing more than P&C insurance, a designation will be helpful. Eventually, the future on the planning side would be that if you don't have a designation, you'll stand out... but for the wrong reasons. CFP is one, CLU, ChFC, LUTCF, LACP, FSCP... there's a bunch out there.

 

[Mike007]

Most P&C commission is 13%-15% for Personal Lines. I do not remember Commercial Lines as I never focus on it. Avoid any cluster that does not give you binding authority. You must have binding authority in the P&C industry. P&C clients don't have the time for you to get back to them (maybe with the exception of Commercial Lines). It's a buy now, get my policy now. If you can't do that, someone else will. It's not a 2-4 day transaction type of sales. When a client walks out of your office, they expect a policy.

Most traditional life insurance commission range from 80%-100%. Niche market like Final Expenses averages between 100%-130%. Most life insurance is paid up front, minimal renewal. Your biggest commissions come from IUL, GUL, and Whole Life. Term and Final Expenses are paid the least.

Honestly, higher education is not a requirement to become an insurance agent or a financial advisor. You just need to study and pass online courses. But if you want to go to school, props to you.

While in school, take Marketing courses. 80-90% of the people who fails this industry is because they lack the ability to find clients, which is Marketing. If you can not master Marketing, everything else means sh*t. You can have 10 Ph.D. in finances and it doesn't mean dick because you will have no one to sell to. No one to sell to equals working elsewhere.

Take courses in Public Speaking too. It may serve you well later on. The better a speaker you are, the better the closer you are. It's all about communications when you are in front of a prospect. Can you communicate your benefits to the prospect to buy from you. Especially those that want to do seminars in the future.

My advice to you is: Do not jump in all at once. Build your practice one step at a time. It is too much and too overwhelming for someone as new as you. Decide which insurance you want to work on and master it. Go to the next once you are ready. Securities should be your last step. There are so much you need to learn on the securities side, I do not recommend you jump into it in. Only go there after you have mastered the rest of your insurance and that is like 3-5 years down the line.

 

[MikeyR]

Most P&C commission is 13%-15% for Personal Lines. I do not remember Commercial Lines as I never focus on it. Avoid any cluster that does not give you binding authority. You must have binding authority in the P&C industry. P&C clients don't have the time for you to get back to them (maybe with the exception of Commercial Lines). It's a buy now, get my policy now. If you can't do that, someone else will. It's not a 2-4 day transaction type of sales. When a client walks out of your office, they expect a policy.

This is exactly what I thought, ownership & binding authority is going to be my main focus I am not worried about the commission or flat fee as much. How long do you typical stick with a cluster before moving on is it a client amount or premium volume.

Also do you know anything about profit sharing or any other sorts of incentives that companies offer

Most traditional life insurance commission range from 80%-100%. Niche market like Final Expenses averages between 100%-130%. Most life insurance is paid up front, minimal renewal. Your biggest commissions come from IUL, GUL, and Whole Life. Term and Final Expenses are paid the least.

So does this average out to like a couple thousand per sale depending on the amount they request? But thanks kind of what I figured

Honestly, higher education is not a requirement to become an insurance agent or a financial advisor. You just need to study and pass online courses. But if you want to go to school, props to you.

While in school, take Marketing courses. 80-90% of the people who fails this industry is because they lack the ability to find clients, which is Marketing. If you can not master Marketing, everything else means sh*t. You can have 10 Ph.D. in finances and it doesn't mean dick because you will have no one to sell to. No one to sell to equals working elsewhere.

Take courses in Public Speaking too. It may serve you well later on. The better a speaker you are, the better the closer you are. It's all about communications when you are in front of a prospect. Can you communicate your benefits to the prospect to buy from you. Especially those that want to do seminars in the future.

This is kind of what I figured that a degree isn't mandatory I am lucky enough to be in the position where my family can pay a significant amount of the cost so I am doing it purely to meet people and to check off a box out of respect for my family. I had some unique ideas on lead generation using different forms of Social Media, also I noticed its pretty common that people buy leads does that actually work?

My advice to you is: Do not jump in all at once. Build your practice one step at a time. It is too much and too overwhelming for someone as new as you. Decide which insurance you want to work on and master it. Go to the next once you are ready. Securities should be your last step. There are so much you need to learn on the securities side, I do not recommend you jump into it in. Only go there after you have mastered the rest of your insurance and that is like 3-5 years down the line.

This is probably my greatest weakness I see so much different opportunities and things to try that I can't resist, realistically I really should focus on P & C for a couple years until my agency starts to become self sufficient before attempting to add multiple licenses aswell the CFP.

 

[Mike007]

As far as profit sharing and how long should a person stick with a cluster depends on the contract you signed with them. Each cluster runs things their way. Profit sharing comes with meeting certain quotas set up by the company. As far as contracts, some contracts run longer than others. Make sure you read the fine prints when it comes to contracts and profit sharings.

There are advantages of being in a cluster and going out on your own with direct appointments. It will depend on your personal taste. And it will also be about production as well. Can you do it alone?

When you are in a cluster, the production does not fall on your shoulder alone. The whole cluster's production may allow you to keep an appointment. Without that cluster's numbers, your contract may be put at jeopardy if you keep missing your quotas. Some insurance companies reward a cluster with bonus commissions on top of the regular commission. By going on your own, your productions may not be enough to earn bonus commissions. Some bonus commissions are as much as your regular commission. And those bonuses are paid for new business and renewal business.

Yes, permanent life insurance policies, you can make in the several thousands of dollars in commission per sale. Final expenses and term policies are much lesser due to smaller premiums. The higher the premiums, the more money one makes.

If you want to make a lot of money in this industry, know these two words: Annuity & Kai-zen Plan. These two don't come along often but when they do, it's a big commission. My agency's best Annuity commission was $60,000. And my agency doesn't even focus on Annuities.

Buying leads does works but it varies when it comes to success. Overall, it is expensive. Lead may be part of a source but should not be your only source for prospects. You should have at least 4-5 different pipelines to bring in business. The more you have, the higher your odds of success. There are certain things you are better off doing yourself and there are things better off if you source it out when it comes to marketing.

I suggest you buy some books to help you along the way: Insurance books, marketing books, and sales books. Learn from people's mistakes and success. It helps you avoid pitfalls. Most of all, learn to listen. Sales are more than doing presentations on top of more presentations. Clients aren't interested in hearing you talk. They are interested in finding solutions for their problems. If you spent all your time yapping, how are you going to know what your client's problem is? Let them talk, find out what their problems are, and solve it.

 

[MikeyR]

I had never even heard of a Kai-zen until now, so it was pretty shocking to hear that was combined with Annuity as the top commission products, out of pure curiosity how does compensation work on those? I know my grandpa purchased a recently sized with one with a rider so quite curious how much the guy on the other end made?

Interesting I wasn't aware there was flexibility in the commission amount,
1) Is the quota from the carriers volume or is it premiums?
2) Does that quota require you to write new business or hold a certain amount?


My marketing plan is
1) Primarily networking and referrals
2) Cold Calling/Knocking, I want to focus on Commercial!
3) Digital Marketing, of my own via YT & FB Ads
4) Lastly the one I am least comfortable with is buying leads..

I agree that listening is very crucial I guess its easier said than done tho...

I suggest you buy some books to help you along the way: Insurance books, marketing books, and sales books. Learn from people's mistakes and success. It helps you avoid pitfalls. Most of all, learn to listen. Sales are more than doing presentations on top of more presentations. Clients aren't interested in hearing you talk. They are interested in finding solutions for their problems. If you spent all your time yapping, how are you going to know what your client's problem is? Let them talk, find out what their problems are, and solve it.

 

[Mike007]

Basics of commission break down if you aren't familiar with it.

life insurance:

If a client pays $300 a month on a life insurance policy.

$300 X 12 months = $3,600

Your contract: 90%

3600 X .90 = $3,240 is your commission

If your client is paying $50 a month for life insurance

$50 X 12 months= $600

Your contract: 80%

$600 X .80 = $480 is your commission

Annuity:

Annuity, depending on the type of annuity: fix, index, or variable. Pays up to 7%

Your clients puts $1,000,000 in an Index annuity:

Your contract is: 6%

Your commission is $60,000

I don't recall how the Kai-zen commission is paid. Kai-zen Plan is bank financed life insurance plans design to max fund for retirement. Kai-zen Plan is designed for higher-income earner. Target market: Business owners, Doctors, people with over 6 figure income. I didn't do the research, my business partner did and it wasn't much of an interest to me because I don't have a market for Kai-zen at this moment.

As for P&C production to keep a direct contract, I'm not sure what the qualification was. I'm going to assume it's going to be different from company to company. When I ran my P&C, it was through a cluster and I had no quota to worry about. I did talk to a company rep I had established a good relationship with him and he told me he could give me my own direct contract if I would write 5-10 policies a month for him. That was as close as I ever got to when it comes to getting my own P&C contract outside of a Cluster. Anyway, I'm out of the P&C business at the moment.

 

[DHK]

There's typically a commission split/cut with the lender when doing premium financing.

 

[MikeyR]

There's typically a commission split/cut with the lender when doing premium financing.

Are you talking about the Kai-zen policy?

Annuity:

Annuity, depending on the type of annuity: fix, index, or variable. Pays up to 7%

Your clients puts $1,000,000 in an Index annuity:

Your contract is: 6%

Your commission is $60,000

Thanks I believe my grandparents annuity is something like $400k with a bonus for when he dies. So that could be quite the payday if you are able to sell those.