Starting an Independent Agency

[Mark savant]

Hello,

I have been managing a State Farm office in Florida for almost 10 years. I have decided I can no longer manage another book, but rather need to begin building my own. The idea of writing for many carriers is extremely appealing, so I am beginning the process of researching and developing a business plan for an independent agency.

It strikes me that the best option for a new agent without a book is to join a cluster. Having a direct contract with carriers would probably be optimal, however without an existing book and heavy volume requirements, might prove difficult for a new agent. Is this accurate?

Are there any clusters that I should be looking at? What is the best way to vet them? I'm assuming emailing / calling is a good starting point. I value owning my book, and would probably prefer to service my book as well. It seems that is the best way to differentiate myself and my staff. So far, I'm looking at groups like; InsureZone Direct, Pacific Crest, SIAA, SAN Florida. Any input on these groups, or suggestions of other groups to look at.

I'm also curious about the market as a whole. Do you find independent agencies to still be a viable model? How do technologies like Artificial Intelligence and automated motor vehicles impact the space?

Thanks for the input. It is all appreciated.

-Mark

 

[MilciadesAndrion]

Did you try an Field Marketing Organization?

 

[Matthew King]

If you wanted another IMO/NMO/FMO to look at you could give me a call.

I'll also give you a list of questions you could ask to make sure any red flags pop up. (of course, you can ask us these questions too).

Will you sign a pre-release agreement before I sign up with you? (answer should be yes)
How do releases work with your company? (answer to this should be we give you a release as long as you don't own any debt to insurance carriers)
What are your commission starting points?
Will I get copies of my commission schedules? (answer should be yes)

At most, this should be what you ask. If any of these answers are NO. Run Away.

 

[Mark savant]

I'm not familiar with the terms imo, Fmo or no. Let me read up on those options. I also read through the stickied post on this forum. A lot of great information there.

I have a follow up call with a director from Pacific crest in a few days, so I'm interested to hear more of how they operate.

How important is it that you own your own book? Selling the book back to the company or to a new company agent for a % of the equity sounds less than optimal, butane not the worst either. I suppose it all comes down to the numbers and the contract.

 

[dorado]

With your experience probably some non standard companies would easily appoint you (Progressive,etc.). You will also need E&O Insurance. I recommend to look for the many threads that cover this common theme. I also recommend to go and look at the P&C section, since most likely this is where you can build your book of business. I know that SF wants to be all to everyone, but it is best to focus.

 

[Mark savant]

Thanks for all the responses! I've been speaking to a lot of people and doing a lot of research ad I build my model. I need input on a few items.

Firstly, autonomous cars are a major concern of mine. I don't want to build a book, only to have it be worthless as manufacturers provide their own coverage. As an agent, do you feel it is possible to build a book of business on personal home insurance alone? Would it make sense to start a book on home / auto, but shift focus of your business over time?

As we see more autonomous vehicles on the road over the next 20 years, the auto insurance pie is going to shrink. Do you think insurance carriers will still have difficult volume requirements even though their is much less opportunity? As an established agent with a large book of auto, do the volume requirements start to subside?

As a startup, how many direct appointments make sense? Of I have 10 auto carriers, it may be impossible to meet the volume. Is it better to start with just 3-4?

Thanks for input!

 

[paul melgoza]

Now im curious why after 10 years of building a book with SF why would you leave them? Im asking because im currently in a franchised brokerage and am wanting to get out so I could either open my independent brokerage or join state farm.

 

[Dreamiekid]

Hi Mark,

I know you can get direct appointment. You do not need a cluster unless you need a specific company. All these people that are talking telling you that you can’t do it, well yes you can.

However, make sure you have enough money to live off it. You will also need a office because most of them required one. Doesn’t matter how bad the office look like.

Let me know if you have any questions.

 

[Markthebroker]

Firstly, autonomous cars are a major concern of mine. I don't want to build a book, only to have it be worthless as manufacturers provide their own coverage. As an agent, do you feel it is possible to build a book of business on personal home insurance alone? Would it make sense to start a book on home / auto, but shift focus of your business over time?

As we see more autonomous vehicles on the road over the next 20 years, the auto insurance pie is going to shrink. Do you think insurance carriers will still have difficult volume requirements even though their is much less opportunity? As an established agent with a large book of auto, do the volume requirements start to subside?

Thanks for input!

As we see more autonomous vehicles on the road? More? I'm confused, I thought you were located in the United States, where we have zero. So, perhaps in the next 10 years we may see our first one. You may wish to do some more homework on that. The only ones on the road currently are experimental.

 

[Warrior]

No matter what kind of autos will be around in the future, they will still need insurance.

You don't need a cluster. If you have proof of your sales with SF and they were high volumes, most companies will sign you on as an independent agent. The pros are:

1. You won't have a monthly fee associated with a cluster
2. You don't have to give anyone a cut of your commissions
3. You can keep all your clients

You really don't want 20-50 insurance companies to write through even if you were in a cluster because you can't write that many policies.

Have a company like Foremost and Progressive to write the lower end of drivers and a AAA, Auto Owners, Selective for higher end drivers. And Encompas and The Hartford for business insurance and Met Life for the 7 life carriers they represent.

You will need to have your own office, E&O, Business BOP, Phone and Internet, office equipment and furniture.

You will need approximately $15000.00 in the bank because you will need to rebrand yourself and build up your lead source. Buying a book is sometimes good if you can find a deal that you don't have to pay the current owner residuals for a period of time.

Starting from scratch is harder. You can't take your current clients with you due to your SF contract.

There are independent agencies that will take you in and let you write under them for a small piece of your commissions. But you may be able to have an office space with them until you can live off of your book.

Food for Thought