Personal Vs Commercial Opportunity???

[ScubaDude]

I recently ended a captive agency contract with Farmers and closed my doors. Now, I'm looking into a couple different options with two different independents in my area to do outside sales. It will be a 1099 relationship in both cases with a commission split. One opportunity is primarily a personal lines agency(but I can still sell commerial throught their MGA's), and the other agency is almost completely commercial. I have years of experience in personal lines, but very little in commercial. I've been told the upside in commercial is much better (all other things being equal) due to it's retention and lack of service work. I also know that commerial clients aren't constantly being pounded with direct company advertising! Actually, in both cases the staff there will be doing the service, so that's not much of an issue. I also have a noncompete with Farmers for the next year that will prohibit me from soliciting or accepting my old personal lines clients. The commission split will favor me substantially better in the personal lines agency, but of course premiums are much bigger in commercial. I would REALLY APPRECIATE any input you have on what you think might be the better opportunity.

[wlunday]

ScubaDude...

Why not work for both? Sell commercial for the one that wants it, and personal lines for the other.

If you are an independent contractor and they pay you only as you refer cases to them, why would anyone else care... you're paid piecework.

You better design a business plan and you might need to license as a consultant, too. How many times do we see someone working to pay bills, but not really making the additional money needed to run a business. You have to pay your own worker's comp, other payroll taxes, establish a retirement account and fund it as well as buying health insurance... you get the picture. Don't sell yourself too cheap!

Good luck.

Swymmer

[jctwindad]

It is rare to find a Personal Lines Producer who can develop enough business to make more than $75,000 per year, and that would probably require around 10 years to do. A good commercial Producer could be making that within 3-4 years, and will probably top out around $200,000 in 10 years or so. The work level would be about the same. The commercial work would be much more challenging and fulfilling for most people. Also much easier to develop expertise, coverage knowledge, niche marketing, etc. in commercial, to set yourself apart from the herd. Personal Lines requires a lot of evening and weekend work. Commercial Lines does not. Easy decision for me.

[Mainemiss]

There is alot more to this than meets the eye.

1. Size of each agency and the quality of their inhouse support'(will your clients be well serviced while you are out selling?)
2. Longevity in business and influence in the marketplace (which will give you a better entre into the new business accounts)
3. The strength of your own networking lines in either personal or commercial.
4. Most importantly be honest about your strengths. You will need to get up to speed very fast if you are to be a commercial generalist. The depth of coverages and the ability to properly assess a commercial risk takes
more than what is needed to competently assess and sell a personal lines account.

If you cannot come across to a business owner of any size that you understand the risks that need covering and how coverage can be structured and competitively priced, you may have difficulty in commercial. Unless you have good inhouse marketing and coverage support.

As suggested, if you can, why not have the ability to do both as you will have the opportunityy to write both if you are active.

I wish you well!

[Sundance]

I opt for the "almost completely commercial" agency. Two reasons, commercial does indeed pay better. Don't fool yourself on the servicing however, you can babysit a commercial account just as well as a personal account. Like you said though, you will have a CSR to handle that portion of it.

The second reason being, that you said this agency is almost all commercial, meaning they do have some personal lines companies. I would much prefer to focus (and do) on commercial and then compliment the account (or my earnings) with personal then to try and place commercial thru MGA's (fees & taxes stink on the insurance quotes bottom line).

I would suggest asking both agencies (if you are still undecided) just what companies they represent so you have a better idea of what you are getting yourself in to.

50% say of a 10% commission on a $1,000.00 personal auto policy versus 25% of 10% on a $5,000,00 commercial policy... I'll take commercial.

Good luck!

PS why did you leave Farmers?

[Porter]

It is a no brainer. Stick with the personal lines. You will make a lot more money as long as you have good markets.

[wlunday]

I still think he might be able to do both. He is going to be acting like a freelancer... and one agency wants commercial, the other wants his personal lines business...

As you say... it's a "no brainer!"

Swymmer

[kevinraz]

Porter, I disagree. Unless you have a HUGE personal lines book and are willing to cross sell life & investment products there is no way that you can make more doing personal lines.

I'm a commercial underwriter. My company's average small commercial account is $6,000, middle market around $60,000.

My personal insurance (2 cars, house, umbrella) is about $1,800 a year.

Just looking at premium I would need 36 personal accounts to equal one average small & one average medium commercial account. Commission is usually higher in commercial as well (we pay 20% on small, 18% on MM except WC).

Scuba, I'd really suggest you do both as there's money to be made on both sides however if you start small (personal) you'll have a harder time getting leads on larger commercial accounts. If they trust you with their business they'll much more easily trust you with their personal coverage rather than the reverse.

Spoken by another former Farmers agent!

[wlunday]

K-raz, you presume too much.

If a producer does a proper job building a relationship with a personal lines customer (client), he can easily learn the transition into commercial lines. Everybody should know... this is a relationship business.

I, and many other IA's have a good mix of both PL & CL business because of relationships. I enjoy being able to ask the "new" auto client where he works, and if he owns a business, for the opportunity to visit with him about my services!

"Cross-selling" life and health is also a great idea. Commercial account clients need it as much as anyone! Being able to discuss buy-sell funding, funding sinking funds, setting up qualified retirement plans, Estate Planning (Funding), Key person coverage... the list goes on. There is where the real $$$ is!

Swymmer

[Porter]

Based on the information Scuba provided I would go with the personal lines agency. Scuba says he has been doing personal lines for years. I would not want to let thoughs relationships go. I would work your dead files from Farmers and any leads the agency provides. Once your non-compete has expired work your Farmers book. Your Farmers book will be a piece of cake to roll over. Once you have built up a sizable book you will have the financial freedom to do what you want.

[volstrike3]

To me, personal lines and small commercial are very similar. I would stick to PL and BOPS if I were you. Middle Market and Large commercial accounts are not moving much in this soft market. It is hard to develop a niche without any sort of pricing advantage and in this market, it is really hard to get a pricing advantage. Companies will drop their drawers to keep a renewal. Starting from scratch right now with no experience and an empty pipeline while trying to make a living off of middle market and large commercial accounts would be really tough in my opinion. Even if you build up and nice book, everybody is coming after those accounts. The typical $100K+ account gets dozens of cold calls 90-120 days before their renewal and your often playing defense.