What to Consider Before Opening an Insurance Agency in 2021
One of the tenets an independent insurance agent takes the most pride in is, well, being independent! It only seems logical then that from time to time many of us will grapple with the idea of going a step further and opening our own shop. While it may be almost too easy to imagine being your own boss (especially on those early Monday conference calls and long Friday afternoons) often the reality looks much different than the fantasy. If you’ve found yourself thinking about opening your own agency more often and on an increasingly serious basis, let’s lay out the factors and challenges to consider beforehand!
Along with the obvious financial considerations, how much time and effort are you able to put into a new start up? Most small businesses take a minimum of 2 years to become profitable. This means committing to no or very little actual income for an extended period of time and even more daunting, the dedication of most, if not all of your waking hours to the hard work required to start from scratch. If you have a young family, or pursuits outside of the office that take priority, consider if and how you’re able to balance those along with a new agency venture.
While family obligations and other commitments are an important part of the timing factor, it can be just as important to examine current social and economic markers. The COVID-19 crisis has been devastating for many industries that we serve, resulting in a loss of premium volume, but many independent insurance agencies are surviving, and some are even thriving despite this. Have a conversation with other agency owners in your area about their observations and concerns, then use all available resources to assist you in strategically selecting when to make your debut as an agency principal.
And now we arrive at a most critical point – what markets would you need to have access to and how will you achieve this? It has become extremely difficult for young agencies to get direct access to the large national carriers due to volume requirements so you may need to think outside of the box. There are brokers, wholesalers, and general agents that will share their access for reduced commissions but be sure to read the fine print. If an eventual direct appointment with a certain carrier is important to you, find out if that company will allow you to AOR business previously written through an aggregator, or if their loyalty to those who came first supersedes this.
Keep in mind that there are many market access resources offered by state and national associations, which are designed to help independent agents grow and eventually achieve their own appointments, such as Big I Markets through IIABA. And don’t be afraid to apply for appointments even if you feel you might be rejected. I promise sometimes you’ll be surprised and even if you aren’t immediately offered a direct contract, it will be beneficial to get your name out there and establishing a relationship with the sales rep.
On to the practical. Do you have the capital to employ help and spend on tools like an agency management system? If so, take time to think about what type of supportive role would help you the most and the kind of manager you would want to be as well as researching the variety of software that’s available. If not, are you comfortable being a one person show and do you have the ability and aptitude to juggle all aspects of the business, including sales, marketing, processing, service, and accounting?
A steady stream of sales prospects is one of, if not the most, important factors in keeping the lifeblood of an agency flowing. Being able to immediately establish a book of business is ideal, but this has become tougher as many agencies have strayed away from allowing producers to own their own book of business. If moving from another agency, do you own or have the option to purchase your book? Or is there a non-compete agreement that would restrict you from soliciting your current accounts?
Current accounts aside, you’ll want to put together a plan to identify and approach new prospects. Think about the spheres of influence you have access to and how you can leverage those relationships to further generate referrals. Lastly, consider whether there is certain niche of business that you would like to exploit, or do you prefer to operate as more of a generalist?
To put it simply, the saying “if you fail to plan, you plan to fail” resonates here. With that in mind, remember that the very best part of being your own boss is the ability to change course when you see fit! This means that if you start out with the intention of specializing in benefits and find yourself stumbling upon more P&C business, it’s okay and even necessary sometimes to pivot. Historically, the most successful individuals and businesses have consciously reinvented themselves from time to time in order to keep pace the world around them. It may be time to start writing that business plan to work towards the dream of agency ownership!
Like many others, Melissa stumbled into the insurance world and discovered it to be a challenging, ever-evolving industry with unlimited growth potential. Having worked within very small boutique firms, traditional agencies and large global brokers over the past 17 years, she finds that the recipe for success remains the same: listen to client and prospect needs, be responsive, and if necessary, go to the ends of the earth to find solutions! The last part of the formula has become especially crucial and much more literal in her current role at Fourth Insurance serves a unique blend of complex and global clientele acting as both broker and risk manager. This experience has increased her technical knowledge exponentially and has had the added benefit of perfecting the pivot!
In addition to client services, Melissa has worked extensively in agency operations and firmly believes that providing ongoing coaching support for agency personnel while at the same time maintaining a reasonable expectation of self-discipline is key to individual satisfaction and advancement.
Melissa currently offices in the Palm Beaches of South Florida and is looking forward to being able to visit clients again as we all begin to reinvent and improve our interactions following the events of this year. Her time off is focused on improving her technique as an amateur dressage rider or relaxing at the beach!
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