Which route is best?

coach · Post by **coach** » Tue Jul 26, 2005 8:04 pm

I need some advise. I am looking to start a scratch agency and have been approved to do it w/both Allstate and Nationwide. Also have opportunity on the independant side. I am leaning towards Nationwide. They seem to offer better financing options and part or all of the loan could be waived based on production. Also, it seems they provide a lot deeper support. Anyone start a Nationwide Agency?

Allstate seems to pay higher commissions in the beginning and you have more freedom when looking to sell your book. However, they seem to have pretty high quotas and don't offer right of 1st refusal like Nationwide, so you can't broker the business. Plus, you need to have liquid capital to start and not really any financing options available.

On the independant side I would use a broker for their contracts with the companies until I have enough experience and book to get appointed myself. Seems like virtually no support from these companies and a lot harder to get started unless I have a lot experience in the business, which I don't.

Any advise will be appreciated. Thanks!

Chad Filley · Post by **Chad Filley** » Wed Jul 27, 2005 6:39 am

I am a PEO/Employee Leasing broker. Now granted, I deal with an alternative market, however it is a very useful market. We as a broker contract agencies all around the country to try and help them with the placement of tough work comp clients or the placement of someone who doesn't want the headaches of the back office work. We have been very successful with the relationships we have created with agencies all over the country.

The biggest benefit of having a PEO product for your agency during the start up time is the number of clients that you will be able to place and not have to turn away.

Agents all have the same problems:
1. Not enough premium (too small of a client)
2. Too high of a risk
3. Bad loss history

Typically these types of problem lead to an Assigned Risk Pool or State Fund.

Now the client pays more & if like the majority of assigned risk pools the agent makes less.

A PEO product has homes for all of these types of issues and even better than that commissions are paid off a % of client payroll, not premium, and are life time vested residual income.

Please call me to discuss further.

Joe Agent · Post by **Joe Agent** » Wed Jul 27, 2005 7:10 am

Don't put all your eggs in one basket. Take the independent route. It will be harder at first but in the long run you will be better off.

You will have more options for your cusomers (Preffered and non-standard). Not just one comapny to put them with.

coach · Post by **coach** » Wed Jul 27, 2005 8:04 am

Joe Agent---It seems like no one wants to give a loan to finance an insurance agency. So I would be starting out of a home office. I feel like I have enough funds for marketing and advertising, but would not be able to afford a lease starting out. So how do I compete with a captive agent who is starting out just down the street, that will be catering to the sames community as I am, who has access to a big company name (Allstate or Nationwide), their operations support, and their marketing campaigns?

Joe Agent · Post by **Joe Agent** » Wed Jul 27, 2005 6:32 pm

You said that you have a broker that you would use for their contracts, what is the split that he will pay you? Also, will the broker give you guidence?

coach · Post by **coach** » Wed Jul 27, 2005 7:43 pm

The broker will give minimum guidance. The split would be 95/5. Basically I would pay him 5% for the use of the contracts.

Joe Agent · Post by **Joe Agent** » Wed Jul 27, 2005 8:29 pm

That is a really good split.

Does the broker have good appointments in place?

Can you get in on his E&O?

Can you get access to his rating programs?

Will the broker let you transfer policies when you get direct appointments?

If you can answer yes to the above that would be the way to go.

coach · Post by **coach** » Thu Jul 28, 2005 4:32 am

It's a YES to all of those. However, I still have to believe that it would take significantly longer to build up my agency, than if I had the support from a big name insurance. Joe Agent---I am not sure if you are independant or not, but if you are, what would be the most effective way for me to attract clients on a limited marketing budget and no office.

Joe Agent · Post by **Joe Agent** » Thu Jul 28, 2005 6:49 am

I am an independent agent and have been a captive agent in the past.

Since you are new to the business what you should really consider is working for a broker as a producer for about two years before opening your own office. That way you can have them provide you guidance and support. Once you have built up a book of business of your own and you can get some direct appointments then would be the time to open up your own agency.

For marketing on a budget, pass out flyers in the morning, call on real estate offices, mortgage brokers, escrow offices during the day, cold call at night, etc.

sanddog · Post by **sanddog** » Thu Jul 28, 2005 10:23 am

Coach, NationWide (Allied) Rocks ! Allstate & farmers suck egg's you will get hosed by both eventually. I am a large account broker for 15 years. Yes you will learn more with a broker like my self. However none of us have the time to teach you how to access all carriers and use their on-line systems. How to rate and underwrite a risk. How to service review client's for renewals. I think in your case, unlike a lot of other's who have asked this question. (Which direction do I go?) If you can truly get appointed by Nationwide (Allied) I jump on that in a heart beat if your new to the business. They will teach more like a broker, one reason is you can go outside the company.
Allstate, Farmers suck egg's who will get hosed by them eventually

coach · Post by **coach** » Thu Jul 28, 2005 2:44 pm

sanddog--Thanks, that is the direction I am leaning towards. I've met with the district manager several times, and it looks like the ball is my court right now.

coach · Post by **coach** » Thu Jul 28, 2005 6:26 pm

I have never done insurance sales in the past. How difficult is to sell $400,000 worth of premiums per year with an additional 1 or 2 people on my sales force? I live in Ohio where the average auto premium is around $800/yr and home is around $600

carterrud · Post by **carterrud** » Fri Jul 29, 2005 9:05 am

I went the independent route. I have 35,000 in premium in 8 months. I have been to many training classes, the tapp program at westfield and motorists programs. Nobody helps me with leads so I have to get everything myself. My company probablly does only 6 mil in premium. I have about 100,000 in quote premium I didn't get because of either can't beat price, no markets, or other stuff. It is very frustrating because you feel like you will never get ahead adn want to quit. I think IA is good but it takes a lot longer because you do not have a boss or mentor showing you ropes. I just grab telephone book and call.

Sundance · Post by **Sundance** » Fri Jul 29, 2005 10:06 am

Well I have done the best of both. I was an independent that is now NW (Nationwide). I adored being independent but the times they are a changing!

Like all direct writers NW has it's moments but having done all my homework (and having had a hubby who'd been with Allstate and friends with Farmers and State Farm agencies) I know NW was indeed the way to go.

You are correct on the financing but be careful of the #'s you promise or you might get in too deep before you even get started. I assure you that CAP loan goes in a heartbeat so KNOW that you will be producing right away.

On another note, I agree with whomever said it earlier, Allied ROCKS for sure however...not all agents get Allied. You have to have the background in commercial or you have to have a book to roll or you have to have an established book of business. So ask about the Allied product if you are thinking of going the commercial route...you may or may not qualify for it.

I am very pleaed with my decision to join NW, to me it's the best of both worlds. You are a direct writer that can broker so in essance you are almost like an independent with a direct writer contract.

NW will require you to go to MANY schools to train so be ready for time out of the office and you (personally) pay for these schools there in Columbus, now of course you are supposed to be sure to include things such as this in your pro-forma (work with your sales mgr).

Anyway, I've rambled enough, I think if you are starting out then a direct writer contract is the way to go (I do however like that if you are truly green to the business, I'd work for someone first to see if you even like to sell insurance...it seems easy but there are a ton of us out there competing for the same biz).

You sounds like your mind is made up already quite honestly...if it is, then don't procrastinate, get on the ball and do it.

Good luck to you!

coach · Post by **coach** » Fri Jul 29, 2005 11:15 am

sundance---Thanks for the feedback. It seems with NW the magic # to shoot for is $1.2mil book at the end of the third year. From your experience or anyone else out there, with everything that NW provides for their new agents, how difficult is it to achieve that #? Is that a reasonable #? Keep in mind I live in a state where premiums are some of the lowest in the country.

Which route is best?

Which route is best?

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