A Guide to P&C for New Agents and New Agencies

Part 2- Becoming Your Own Boss and Starting Your Own Agency (years 3-5) This section is going to be written from the side of an independent agent. The reason being is that some of the stuff applies to captives as well, but some of these things do NOT. Meanwhile, an independent agent needs to know them. Some of the stuff is common sense on if it applies to you. In addition, your captive company will tell you how to start your own agency and what they can do to help. This is why they get some of your money, so talk to them and get it worked out! This is not meant to be your business plan and you have to decide on your own circumstances if these things need to change. I also want to mention that I think that you shouldn't cross-classes when starting an agency. This means that if you are captive then don't open your own independent agency, or if you are independent then don't open a captive agency. Go work for an agency of that class for a while to learn the ropes for carriers and markets, and THEN open your agency if you decide it is a good fit. Otherwise you are still learning too many things at once and you can't focus on growing the business because you are still trying to learn the basics. At this point, you have been working for an agent for a long time now and you are starting to get the itch to be your own boss. There is bigger risk and bigger gain associated with this, so make sure you do it right as this is now YOUR business. There is no one to bail you out, no one to take the blame, and most importantly, no one to make sure you are doing things RIGHT. As an independent agent, here are some of the things that you need to be successful: - Start-up Capital - E&O insurance - Carriers to write business - If required, an office location - A business plan for growth Let's go through these items one at a time: Start Up Capital I mentioned it before but it's worth mentioning again. This is NOT a get-rich-quick operation! You have to pay your own bills and then also operate your agency under the impression that you will not be truly profitable for several years. Each year gets better, however, as long as you build renewals and keep your clients from leaving. Try to keep 6 months to a year worth of expenses in your bank account, or at least enough to make sure emergencies are covered if you have someone else supporting the household. Businesses often die young that have great ideas because the owner couldn't afford to go through with it. Decide on how you are going to be marketing. This will be addressed more in the business plan but the phone isn't exactly going to ring off the hook because you put an add in the phone book. Try to keep your expenses low when starting out. You don't need a CSR, you don't need a comparative rater, you don't need an agency management system, a fancy document scanner, and things like that. You need your E&O, a file cabinet (barely), a phone, computer, a good outfit to wear, and a car. E&O Insurance This is important to keep. This is one of the only things protecting you from making one costly misjudgement. E&O (your errors and omissions insurance) is the malpractice insurance. It is EXPENSIVE for P&C compared to Life and Health insurance. As a newer agent with less than 3 years of experience, your agency could be $2-3,000 depending on your region, book of business size, and other factors. It can be quite costly, and it will probably be on a non-admitted basis at first (meaning that some coverages are stripped out.) DON'T CHEAP OUT ON THIS. Keep your deductible to a sustainable level that you can easily come up with, have at least $1M per occurrence, if not more, and read the policy to see what is covered. Determine if defense costs are inside or outside the $1M in coverage, if you can write life and health as well, and see if there are any glaring exclusions that you think are relevant to you. Utica is a good company but they can be pretty picky. They are one of the go-to carriers for agency E&O, while Rockwood is good for the newer agencies. E&O for less and NAPA insurance are also supposed to be pretty good, but they are just for one agent according to the reps I spoke with, so if you plan to have 2+ agents then you need to change your E&O carrier. Your insurance carriers often judge your E&O as well by looking at the company, your limits, and deductibles, and often have requirements before you can start writing their products. Keep in mind the cost of your E&O as it can go up or down. Don't let it lapse because as a claims-made policy you can REALLY screw yourself even if it lapses for ONE DAY. I cannot stress the importance of your E&O the way I want to, just know this is a big deal. Office Location You have to decide if you are going to work from home or if you are going to work in a brick and mortar building. Ideally, working from home is better since many people buy insurance on the phone, at THEIR house or business, or at a common place to meet. However, some companies all but require a building to appoint you. Both options can work, but decide on the expenses with keeping an agency open and see if it fits into your budget. This is really all part of start-up capital but this is the largest expense someone makes when opening an agency, one of the things that sinks the most money. Personally, if you aren't going to start your agency with 2 people and start with a large book of business or well-funded checkbook, skip the office building until you are a few years into renewals. You won't get walk-in business but the money spent on an office for walk-ins can go towards marketing instead. If you MUST have an office location for carriers or other reasons, try establishing a virtual office. A google search will be your friend here but a VI basically is an office that you can establish for yourself in a building that you can have your mail delivered to and visit multiple times a month for meetings, and probably includes a board room as well. It gives a professional appearance for clients who want to visit you, but reduces expenses since you don't have to pay for an office the entire month or for all the associated utilities. A Business Plan Your business plan should be formally written and something you review at least 2-3 times a year to make sure you are on track. Carriers often ask to review your business plan to see if the production goals are reasonable and if the people you are looking to target fit within the target markets of the carrier. I wasn't kidding when I said that independent companies know they won't be the only one in the office, so they want to know if you can give them what they want. Your business plan will consist of your marketing efforts and what you plan to do for expanding purposes. You really need to have several ways to market that vary in pricing so you know what is effective for you. Some of the major marketing items people do: 1) Cold-calling (cheap and capitalizes on your free time) ------Eventually you can hire a telemarketer to do this full-time 2) Door knocking (business to business aka "B2B" or door to door for consumers aka "D2D") 3) Networking with "centers of influence" which are the people who can provide you leads as a part of their hobbies or professions. This includes lawyers, real-estate agents, mortgage brokers, homeowners associations, heads of specialized hobbies like motorcycle groups, and etc. 4) Mailing pieces of mail to people to solicit a quote. This is often expensive and the ratios of response is usually 1-2% per 1,000 though it could be more or less. The price of this can often be cost-prohibitive for newer agencies. 5) Participating in events like conventions, meetings, flea-markets, car shows, and things like that to target certain markets. Just like mailings, these can be cost-prohibitive. 6) Purchasing leads for people expressing an interest in insurance quotes. These can be expensive and also "junk leads" depending on the company, so it can be hit-and-miss, though spending some money on leads can definitely give a good payout. 7) Generate leads online using websites of yours or others. Having websites for specific markets you want to target and then trying to make them rank in the first page of google can be time-consuming but relatively inexpensive if you do it yourself. There are two schools of thought for generating leads- SEO and PPC. Do a forum search for more information on these. There are plenty more but these are some of the basic ones people think about. Depending on your own target markets, you knowledge and experience, and who you know, you will probably have more options. Your marketing plan will also consist of how you plan to grow. For example, mine talks about having 2 more producers and then when the book grows to a certain threshold or policy count, hire a CSR. It also talks about getting a telemarketer to maintain cold-calling. I also mention some specific growth factors for my agency and the intent to open up another shop in another state. Those are the things the carriers want to know because many agencies flail around and waste the time of the agents and the carriers. A good and unique business plan will do nothing but help you with getting carriers. A carrier on the fence with appointing you may review this plan and decide it is worth taking the risk. Consider this something higher on your priority list because it puts into words what you want the carrier to know and express but can't do so verbally. Carriers to Write Business I feel like this almost deserves its own thread but I'll try to make it easy for you here. Your insurance carriers are what make you unique, special, and able to make your money. Insurance carriers tailor their underwriting, appetites, and coverage contracts to what their specific markets are. You need to think about who you are trying to target first so that way you know what carriers are good for you. If you worked in an independent agency for a few years like I said to, then you probably already have a good idea on what carriers are big in your area and which ones you can get first in the agency. In general, here are some of the categories you will want to fill for your agency. You might have a carrier that can do 2+ of these categories, but make sure you can write a widespread of clients while you build capital, and then later you can start specializing. -Preferred insurance clients. These people are the ones with nice houses, good credit, loss-free, package accounts, and etc. These are what the majority of carriers want, so you probably won't have a shortage of these carriers. -Auto-strong insurance companies. These are for the people that only have auto, no home (or maybe they rent.) -Non-standard home and auto carriers. These are for the people with some accidents and tickets, smaller homes with some claims, and/or lower credit. These people need insurance as well and are typically price-conscious, but may also be customer-service heavy. Progressive, Foremost, and GMAC are usually well known for this area, among others. Non-standard carriers also will be more likely to write in loss-prone areas as well. -Flood insurance carrier. Any carrier, whichever one pays you the most. This is because all flood programs under the NFIP are using the same underwriting guidelines, rates, and etc. under the write-your-own program. If you get production credit with an insurance company for writing flood as well, even better! -Monoline property carrier. This may or may not be an issue in your area, but in NC and SC the monoline market is a hard one to come by. Some clients don't own cars, need insurance ASAP for a home closing, or have auto issues that make it so you have to write home with one carrier and auto with another. ASI and UPCIC are good here, Foremost also can typically do mono-line properties as well. -Any carrier for coastal insurance if you are in an area where you might write a lot of that. This will vary based on state. You might not need these depending on where you are. -Though not necessary, it can be helpful to have some well-recognized carriers for your agency. Travelers, Progressive, The Hartford, and a regional carrier like Erie or Donegal (at least in my region). They can sometimes be great on rates or coverage but it also shows the clients that you have carriers they know and that you are a "totally legit" agency. It's more for show but the carriers will probably service you well in the agency. In particular with this, The Hartford is great on commercial and auto, Progressive is good for non-standard auto and "toys," and your regional carrier will probably be one of your most competitive carriers that you offer. I definitely think a regional carrier will be beneficial to you.


So you Definatley don't suggest a management system to start ?
 
For a small two agents office doing Cars & Homes in CA, what origination P.O.S. software or online services would you recommend?

Thanks in advance
 
I have read all of these posts from you and I must say they seem very valuable. I am scheduled to take the insurance classes for my licensing in February. I live in Raleigh and I will be looking to get started in the business. I was hoping that your will still e around for some information as needed. I know this post is old, I was hoping you are still around and will se it. Anyone in The Raleigh, NC area that cam provide some guidance or needs any help in their business please let me know. I am a retired Master Sergeant from the Marine Corps. I was in for 24 years and I spent 17 of them in recruiting. I feel confident in my abilities to communicate, prospect and sell. Where I know I will struggle is product knowledge and with out that I cannot sell. I am very motivated, upbeat and have a positive attitude,;)

Respectfully,
Daniel
[email protected]
 
Great post since I'm learning everything I need to be successful in the insurance business! Is there anyone on here from the Tulsa, Ok. area to give some advice on who to work for? I'm studying now for my P&C license so I'm trying to do all the research I can.
 
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This be a new path for me selling insurance. I have another buisnies that seems to be working out like I was told. I hope the same for this. Im sick of being poor and not being able to provide for my family,
 
Hi Guys.. Question, Do I need to register a LLc and have it also licensed. Or can i , and work as a sole proprietor and just use a dba for my agency name??
 
Hi Guys.. Question, Do I need to register a LLc and have it also licensed. Or can i , and work as a sole proprietor and just use a dba for my agency name??

Either one can work if you do an LLC your need to get an insurance license for the LLC. If DBA your individual license can work and you can list the DBA under your individual license.
:idea::SLEEP:
 
I have found that as a new agency, SmartChoice has a great program where you access some national carriers and have no production requirements. You own your book of business, to boot! If you have a no-resident license in other state (to handle your friend or relatives insurance) they can provide access to additional states, as well. I think they operate in 40 or so states. I am pretty happy with how things are going and will provide an update, in the future.
 
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