Property, Homeowners, Etc - where to start?

[pafinanceguy]

Hello.

We're looking to expand our business operations into the insurance world. We are very, very early in this process, and currently operate a very successful brokerage in another finance market. Our clientele would eat up property insurance, homeowners insurance, etc. so we are thinking this might be our next area of expansion. Since we're very early on in this process, here are a few n00b questions.

Buy vs Build
Should we buy an existing operation if we have the capacity?

Commissions
Generally speaking, is it fair to say we would receive ~8% annually for each policy solid?

Major Challenges/Considerations
Anything we should be aware of?

WWYD
What would you do if you had $150k in cash (minimum) to invest knowing that all other operational expenses would already be covered by existing operations.


Thanks in advance. Again, we are just starting to think of this and have no prior experience. In addition to reading responses here, we will be spending the next few months researching and learning

 

[fed up]

150K is probably not going to buy a book of any value but if you buy a book and retain 1or 2 of the producers who worked for that book then you have a huge advantage in that your new customers still can speak with a familiar person

 

[pafinanceguy]

@fed up Thanks for your feedback. What investment level would allow us to buy a book of value, ballpark?

 

[fed up]

Books generally sell for 2 - 2 1/2X the value of renewal premium, so a $1M book would sell for 250-300K. There are deals everywhere and in every state. Your 150K would get a book valued at 500-750 which would bring in 40-75K in renewal commission. If you retain 93%n of your customers you would lose 5k per year so there is a huge advantage to keeping someone from the old staff, keeping the phone number if available. There are other people out here with more experience in cost of obtaining a book. It will also be your job to root through the policies and find the crap and look out for potential E & O situations

 

[pafinanceguy]

Thank you, @fed up -- I really appreciate your insights.

 

[marindependent]

Our clientele would eat up property insurance, homeowners insurance, etc.

Interested why you think your clientele would eat up [the] property insurance [that you guys sell]? I would challenge that assumption and test it. Hopefully it is indeed true. A lot of new agents come into business thinking "Hey people will get this and that insurance product from anyone, why not me" and it often does not work out that way

P&C insurance is not easy, especially if you do not have experience in it.

 

[InsCommentary]

You need a consultant, I'd suggest either of the following:

Al Diamond
[email protected]

Chris Burand
[email protected]

 

[pafinanceguy]

@marindependent - that's a very fair point and something that we intend to further validate over the coming months. In the most simplistic terms, we've been asked many times and believe this can/will be true given where we sit in the real estate value chain. Needless to say, I greatly appreciate your honesty here.

@InsCommentary - Thank you so much! I had started researching consultants and will put these two at the top of the list given your referral.