Congratulations on starting your own independent insurance agency! You’re in good company. Did you know 3,000 new agencies have started in the past five years? (Independent Insurance Agents and Brokers of America’s 2016 Agency Universe Study).
It doesn’t matter if you’re brand new to the industry or you’ve been in it a few years. Owning your own agency can be both exciting and challenging.
This is an overview of the steps you need to take to start an independent insurance agency. In future posts, we’ll look at these steps in more depth.
1. Get your license(s).
What license you need will depend on your state and the lines of business you plan to sell.
Contact your local association chapter. Two of the biggest: Professional Insurance Agents (PIA) or Independent Insurance Agents and Brokers of America (Big I, aka IIABA). They are a great resource for what type of license you need and how to get it. Also, check out your state’s Department of Insurance.
2. Talk to your lawyer.
If you have a non-compete or other contractual issues, a lawyer can help you navigate that. They can also give you advice on the business type that is right for you.
For example, whether to create your agency as an LLC or S-Corp. Different types have different tax and liability implications. You definitely want to talk to a lawyer on this one.
3. Raise capital.
Are you going to start your agency from scratch? Or, are you going to buy a book of business? Either way, you will need capital to get started.
Capital is also necessary to pay for office space, furniture, hardware, insurance agency software, E&O insurance, etc. The amount may vary depending on your plan.
4. Create your business plan.
Whether you are trying to get a carrier appointment or apply for a business loan, people are going to ask to see your business plan. Here are the five topics to cover in your business plan:
- Who are the people responsible for implementing your plan? What are their skills, knowledge and backgrounds?
- What is the opportunity? Who is your target customer? What are your products/services? How will you position your agency against the competition? (Hint: this is where your agency marketing plan comes in.)
- How is the business environment relevant to your agency’s operations? Can you show you understand the impact regulations, the economy, competitors, etc. can have on your business? How will you navigate or use these factors?
- What risks do you anticipate facing? What are your strategies to resolve these issues?
- What is your start-up budget, cash flow forecast, and production forecast?
5. Get E&O insurance and meet your state legal criteria.
You may need errors and omissions coverage before getting your entity license. Most carriers will require you to have E&O insurance.
Check with your local association (PIA or Big I). They may offer E&O insurance or can help you find it.
Also, register your business with the state. Get your taxpayer identification number from the IRS.
6. Get access to insurance markets.
Before you can start selling, you need access to insurance markets.
You can try to get direct appointments, though this can be difficult for a startup agency. You can also go indirect through an MGA, wholesaler or market aggregators.
More on access to markets in a future post.
7. Find the right technology.
In this digital, connected world, technology is critical to the success and growth of a modern insurance agency.
Comparative rating system. Agency management system. All necessary, but which insurance agency software do you start with? Depends.
If you have more than a handful of carrier appointments, a comparative rater is worth the investment. It will save you so much time when quoting a policy. If you only have a few appointments, start with an agency management system.
Don’t make the mistake of not starting with any systems. Once you go down that path, it can be a hard habit to break and a tough transition to work through.
Whichever system you choose, start with good habits and good technology. Your agency will be more efficient and more productive.
When you’re starting out, digital marketing may not be at the top of your priority list. One thing is a must: Your insurance agency website.
I recommend that you secure your web domain and build a website when you’re starting out instead of waiting. (Check out this ultimate guide to building a website if you’re not sure where to start.)
A great website doesn’t have to cost a lot. Find a website provider that can scale with you as you grow and your needs change. (This is why we offer multiple plans so you can choose the one that best fits your needs.)
8. Stay on top of trends.
Read trade publications, forums and blogs for information, news and tips. Join your local association (PIA or Big I) for networking and education opportunities.
Attend events like conferences or webinars where you can learn. Listen to podcasts; watch videos. Don’t stop learning!
Remember. This is just an overview of how to start an independent insurance agency. We'll cover some of these topics more in-depth in future posts. So stay tuned!
Have you started your own agency? Leave a comment below with your best tips for new agency owners!
The Modern Agency monthly blog series discusses various topics related to the success and growth of independent insurance agencies in the modern market.
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