Should I Go Out on my Own or Stay?

Aug 14, 2015

  1. bww143
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    bww143 New Member

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    I am a 1099 employee with a local independent P&C agency in Indiana for the last 7 years.
    I pay $300 month in fees for EO, agency management system, and a multi-rater. I currently produce 150k in new business per year and my book is 500k.
    I get 70% split for new and renewal business with at an average commission of 15%


    I have been curious about going out on my own and joining a cluster or trying to get appointed directly. Given the above numbers, would you all consider joining a cluster, or is it difficult to get appointed directly by companies with the above numbers.

    Thank you,
     
    bww143, Aug 14, 2015
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  2. jkearns
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    jkearns Expert

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    Go out on your own or buy a book from either a captive or another independent. I would only stay, if the current agent you are working for is willing to cover you under his E&O policy, give you access to the rater and management system at no-cost, plus give you a 90/10 split on new business and 70/30 split on renewals.
     
    jkearns, Aug 15, 2015
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  3. insurance1822
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    insurance1822 Guru

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    Jkearns -after you posted your commission rates...this guy is making basically what you do except for farmers auto/home? So why go on his own?

    If you open your own place your expenses will drop you to around 70%. Yes you'd could potentially make more, but you're not producing enough to sustain you're own shop with multiple carriers.

    How many carriers do you currently have & who's serving your book?
     
  4. indienoise
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    indienoise Guru

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    What??? Who is going to give him that kind of deal?
    I WISH my expenses were only 300 a month, and I'm fortunate enough to not have a lease. 150k a year is ok but not rock star material, he'll never command a split like that at that rate. If he could get the monthly fee waived, that would be a good deal.
    I feel my own production is average at best, and in my first 4 months independent i put on 100k. I still havent paid myself a dime yet, and my upcoming marketing is going to eat my next month or two of profit.
    Telling this guy to go on his own is a bad idea.
     
  5. bww143
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    bww143 New Member

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    I might also mention I do all of my own service work too.

    Is the split I currently have where I get 70% on new and renewal considered low, average, or pretty good compared to other agencies you might be familiar with?

    Some of our carriers include Donegal, AAA, Travelers, Grange, Hanover, Progressive, Allied. Any idea how difficult it would be to get appointed with these carriers?

    Thanks,
     
    bww143, Aug 15, 2015
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  6. jkearns
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    jkearns Expert

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    For my agency, I have one CSR/Agency Producer who does all the service work for my captive agency in California, plus she handles all service work for my retail and wholesale brokerage for entertainment insurance products, that I transact in all my non-resident states. I pay her a hourly, plus give 35% commission on all sales she's closes. As for other agents or brokers who produce for my wholesale brokerage, I do it two different ways: 1)If they want to work under my e&o, I do 90/10 with the producer for new business and 70/30 for renewals. In addition, I charge a small broker few on top, which they get no part of. 2) If they provide there own e&o then I give 100% commission on new and renewals, but I charge a much higher broker fee on top, which again they get no part of. Additionally, all personal lines produced in my non-resident states, I refer it out to a GA who handles all quoting, closing, and servicing, which they split the commissions with me and I own the expirations, but I usually BOR the clients prior or upon the renewal with another intermediary, which gives me a far better split and I have my CSR take over those service requests. For all other commercial lines sales in my non-resident states, it depends on what it is on if I will refer it out to the GA or take it to one of my apointments or brokerages I produce for. All producers, usually have to service there clients or work with my CSR on staff to do so.
     
    Last edited: Aug 15, 2015
    jkearns, Aug 15, 2015
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  7. indienoise
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    indienoise Guru

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    Progressive is typically pretty easy to get appointed with, but if you're currently writing ASI, you'll find they want a track record of producing preferred auto policies before getting you appointed with ASI.
    The other carriers will want a strong production history, and will likely be looking for a six-figure annual commitment, EACH. Honestly, with the numbers you've given, I doubt they talk to you. I can't speak to how Donegal might react, they don't do business in my state, but usually carriers like them are more willing to take on a scratch agency - again, with your numbers, you'll be selling your soul to just them and won't really be independent any longer.
    If you join a cluster, you'll either get the majority of the commission but pay a monthly fee, a large upfront fee, or you'll be taking a split, which could net you somewhere between 70 to 85%.
    IIABA has Eagle Agency (the option I"m currently pursuing), which only has a very small upfront fee, but commission is tiered starting at 66% then going up to 90% based on size of book. You own the book, no buyouts. You can get your rater and management system through them as well, but then you'll be paying around 600 a month, I think.
    You can also use one of a couple of wholesalers (which I'm doing until I have some preferred appointments), but again, your split will not be any better than you currently have.
    I left an arrangement similar to yours, it was a 65/35 split and I did most of my own servicing and marketing, but it was a good move because I left a captive agency. If you're wondering if you'll be more profitable on your own, you won't be until you have a much larger book, and at 150k per year, you'll be YEARS getting to that point. Not to mention you'll now be spending more time shopping and then maintaining your software, dealing with carrier reps, managing the business side of the agency, etc.

    It's an exciting thing to do, and yes it was (and still kind of is) a rush, but adrenaline ain't paying any bills.

    I promise, I'm really not trying to be mean. Just being real.
     
    Last edited: Aug 15, 2015
  8. russelltw
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    russelltw Guru

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    You better have a system in place for leads. Also have some cash on hand. Many people think about going on their own when they are simply order takers at an agency. Hey I write all this business myself (when the leads actually walk in the door). They don't realize the effort/expense that goes in to getting those leads or walk in business.

    I went out on my own (life/health/medicare) when I checked my number for the previous year. My own marketing efforts had generated 96% of my business I wrote. At that point, I knew I could go out on my own...also had about a years worth of expenses saved up.
     
  9. bww143
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    bww143 New Member

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    I know the rates Travelers and Progressive have, but do you have any idea how they compare to Met Life or Hartford? I provide 100% of my leads.
     
    bww143, Aug 15, 2015
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  10. insurance1822
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    insurance1822 Guru

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    For some reason....I'm pretty sure you were the fat kid that never got picked for anybody's dodge-ball team but told their cousins they were team captain.
     
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