Are you wanting to learn how to start an independent insurance agnecy? We did this in 2018. If you’re currently a captive agent and thinking about making the switch, here are a few things you need to know!
As an independent agent, there is no guidance. No one really tells you what to do next or how to get setup. It’s all on you to piece it together.
This is a good thing but also a challenging one.
The most important thing you’ll need in order to open an independent agency are carriers. Independent companies like to see someone with experience in the industry and a solid plan for marketing their products.
The process of “interviewing” is nothing like getting an appointment with a captive company. One major difference? No one cares how much money you have!
If you try to become an Allstate or Farmers agent, you’re going to have to show significant capital reserves. But this is not true for independent appointments.
An independent carrier will want to know how you plan to sell their product and how much you’ll commit to selling in your first year. Some will require larger sales volumes than others. For example, one our main carriers required $50,000 in production the first year. (We did $100k for them.)
If you don’t hit the number, they’ll drop your appointment. Simple as that! So you don’t want to over commit, but keep a reasonable volume of what you can achieve.
Not all carriers are willing to take on a small scratch agency. They might require that you have a $1 or $2 million dollar book before you can qualify for an appointment. In these cases, you can wait it out or consider a contract with an MGA. Here you’ll be able to access more carriers without a minimum agency requirement, but you’ll be required to share a piece of the commission with the MGA. (For example, a 70/30 split. 70% of the commission to you and 30% to the MGA until you hit a certain size. Once you hit that level, you get ALL of the commission.)
Find The Gaps
The best thing about an independent agency is having a wide variety of carriers to fit every need. Some have better auto rates, others have better home rates. If you find you’re missing in a key area, you go find a carrier that can fit that need.
Some carriers will care about a prospect’s credit. Some will prefer homeowners, while others have great rates for high risk drivers.
You’ll need at least 3 solid carriers to give you a good start. Try to get a good idea of what each one considers their “sweet spot.” What kind of customer do they want? What is their most competitive product? Will this allow you to be competitive?
Brand Name
When you’re captive, you sit behind a strong brand that does a lot of the marketing for you. This is NOT true with an independent! You’ll have to create your own brand.
We named our agency Sharp Family Insurance. I designed our very simple logo in Canva and our first website was just a couple of pages on WordPress with Wufoo forms. That worked perfectly for the first 8 months!
We also worked out of a small one room office on the 4th floor of an office building downtown for the first 6 months. Once the agency was picking up and we had a better idea of who our target market would be, we moved to a beautiful new retail location in a small shopping center.
My advice? You want to keep your agency overhead low and streamlined as long as possible, so your money can go to marketing and getting leads.
Consider your logo and brand carefully because you will use it a lot. Choose a color in your logo that you’ll use in your social media and website graphics. We print our logo on our envelopes and use it in all of our online marketing. We even had a sign made to put on the front of our office space. (Another thing a captive carrier will usually provide for you!)
Learning Curve
You have to be prepared to spend a lot of time learning in this business. When you’re with one company, it’s pretty easy to learn all of their procedures and rules. But when you have a LOT of companies? It gets more complicated!!
I frequently have to stop and look things up or call the help desks! Everyone has different underwriting requirements, inspections, claims processes, billing options, and massively different online systems. Be prepared to spend a lot of the time on the phone getting help for a while!
Overall I hope this gives you a few good starting points as you research opening your independent agency. The most important thing? Know that you’re the kind of person who wants to have lots of options and you’re willing to figure it out for yourself. If you want someone to have all the answers laid out, staying with a captive is probably the way to go. Captive and independents are both great, but your personality and overall longterm goals will determine which is the right fit for you.