New Insurance Agency Startup Questions

[jtarbuckjr]

I did just what is talked about here. I have about 5 yrs experience and I decided to start my own. It has not been a year and this is how it has played out. To date I have put into the business approx. 60K in cash. About 20K of this has come back out for personal expenses. This is just the way I decided to do it. Also bought a building for 150K which is separate from the Agency. E & O was the first expense. Out of the capital I put a new phone system for 3K, AC/ heating replaced 3,500. Paid the BOP for a year 2,200. I spent months in the beginning acquiring appointments. I have most of the ones the Agencies in my area have. Luck I guess. I have good carriers and can write any piece of business that comes my way. Personal and Commercial lines. I have a Health, Life and Annuities license . Did the same with carriers on this side. I know I am paying too much for my website program, but not to hassle with it for the first 2 years might be worth it in the long run. The building is small, but new with 4 offices and reception ++. Room to grow. Just me and my CSR (new) wife. We have only had the website up and the office for 7 months. I have written about 15 HOs and the same for auto. No commercial. I have quoted several and was competitive, but the luck was not there yet. I would have recouped about 30K in commissions on one of these accounts. Next year. My overhead each month is just at 1K. Not much. Being just me, doing everything, I have not been able to really do any personal marketing. I meet with a man tomorrow about buying his book of business. 200K annual commissions. Do not think this one will go thru, but maybe. A cash flow is what would be nice. The point here is to share my experience. Will I make it? Probably. Do I think about throwing in the towel. Once when I was sick. As you can see I have not generated much revenue, and having to put in a little capital every few months. Not much, but some. The building is paid for, and I have room to do something else if needed. Remember I had some cash behind me. If you don't, it won't. It will be a while, maybe years, to recoup my investment. I am not at the point the Agency is paying all the bills. Second year renewal will not be much. I am friends with large local Agency owners that want to see me succeed. They have helped me. Before I did this I almost went into a partnership with one of them. Do I want a partner? No. Who does. By the way, banks do not want to loan money. These Agency funding companies require, and charge too much. I don't know what will happen here, but I will post again regarding this next spring. This is just my experience and probably not a good one to most. Anyway, good luck out there.

[d's insurance store]

I did just what is talked about here. I have about 5 yrs experience and I decided to start my own. It has not been a year and this is how it has played out. To date I have put into the business approx. 60K in cash. About 20K of this has come back out for personal expenses. This is just the way I decided to do it. Also bought a building for 150K which is separate from the Agency. E & O was the first expense. Out of the capital I put a new phone system for 3K, AC/ heating replaced 3,500. Paid the BOP for a year 2,200. I spent months in the beginning acquiring appointments. I have most of the ones the Agencies in my area have. Luck I guess. I have good carriers and can write any piece of business that comes my way. Personal and Commercial lines. I have a Health, Life and Annuities license . Did the same with carriers on this side. I know I am paying too much for my website program, but not to hassle with it for the first 2 years might be worth it in the long run. The building is small, but new with 4 offices and reception ++. Room to grow. Just me and my CSR (new) wife. We have only had the website up and the office for 7 months. I have written about 15 HOs and the same for auto. No commercial. I have quoted several and was competitive, but the luck was not there yet. I would have recouped about 30K in commissions on one of these accounts. Next year. My overhead each month is just at 1K. Not much. Being just me, doing everything, I have not been able to really do any personal marketing. I meet with a man tomorrow about buying his book of business. 200K annual commissions. Do not think this one will go thru, but maybe. A cash flow is what would be nice. The point here is to share my experience. Will I make it? Probably. Do I think about throwing in the towel. Once when I was sick. As you can see I have not generated much revenue, and having to put in a little capital every few months. Not much, but some. The building is paid for, and I have room to do something else if needed. Remember I had some cash behind me. If you don't, it won't. It will be a while, maybe years, to recoup my investment. I am not at the point the Agency is paying all the bills. Second year renewal will not be much. I am friends with large local Agency owners that want to see me succeed. They have helped me. Before I did this I almost went into a partnership with one of them. Do I want a partner? No. Who does. By the way, banks do not want to loan money. These Agency funding companies require, and charge too much. I don't know what will happen here, but I will post again regarding this next spring. This is just my experience and probably not a good one to most. Anyway, good luck out there.

You're not revealing where you are located, and thus, it's hard to give either kudos or sympathy. If you're in a big city, then yeah, not much to show so far. If you're in a small town, it's still not much, but without knowing the demographics and expectations, I wouldn't venture an opinion.

You refer to 5 prior years of experience. Was that as an agent? As a captive? As a producer? CSR? Office manager? Whatever, you should have come out of the gate with at least some kind of marketing plan. Just having a website isn't much any more because we all have websites. You need to figure out how to use that website to bring eyeballs and traffic to the agency for quotes. That's a very hard task in today's market. Ever done a web search for 'cheap insurance' or 'low cost auto insurance'? You'll get seventeen million hits, each offering great rates, over the top service and the words 'safe, strong, secure'. Big deal and what does that have to do with agency marketing?

Somehow, unless you have the resources to last for years without much income, you're going to have to do something that makes the phone ring and stop hanging your hat on that one commercial quote that was going to bail you out. At some point, you'll have to learn that you don't need practice giving quotes and that some accounts will just use you and your time and efforts to validate the status quo incumbent agency and policy. As for the bread and butter personal lines, you'll have to produce something or some of those preferred appointments will melt away for lack of placement.

Right now you're blessed with very low overhead. I hope you can take advantage of that and generate more than 2 new business pieces a month. If it's just you and your wife/CSR, then I dare say, you might want to give up answering the phone for a few hours each day and at the very least, place some door hangers in neighborhoods letting people know you're open for business and inviting quotes.

Good luck. I sincerely hope that in six months you can post again and have about five times the production.

[Detroitgirl]

This update is very helpful for me because I am adding insurance to an existing tax business. But, so far, what I am reading is that I should not expect to get much from insurance sales. I will begin with only health and life and will probably not add
the annuities. Will expect to add p&C next year.

Did you have any success with or did you try the online sales leads? Are you experiencing that those who want insurance already have it?

I considered buying a health book of business but it looks like I could spend less money on marketing and develop my own customers. Spending the money on the marketing means no long-term debt for the purchase of the book.

I have learned that simple marketing is more effective than the expensive marketing with no promised results.

Holiday cards with a personal touch - I buy them for half off at Hallmark in October and mail them in December because it takes two months to have them ready to mail. Customers have mentioned them every year.

I use the postal service direct mail program (EDDM) to send cards printed by a local printer and that helps me to target a smaller area and pay less.
Good Luck and thanks for the update.

Detroitgirl

[AgencyEquity]

At the risk of sounding rude and abrupt, as stated in a number of postings like yours in the past, there is NO 3 ring binder or 'job in a box' formula for starting an independent insurance agency from scratch. In fact, as time sunsets on what was the retail insurance agency system, it has become exponentialy much harder to start from scratch and have any hope of success or survivorability. Think about it...you're here telling us you have a dream to start from scratch a personal lines and small BOP agency with a total of five years industry experience. The first question you need to ask is 'what are you going to do that is different from what is already being done in your proposed marketing area?', and the second question is 'why should people bust up their current insurance relationships and do business with me?'

My suggestion is that you concentrate on doing your current job at the agency level and observe everything there is to the mechanics of running and sustaining a retail agency. Cozy up to the agency owner or manager and express a willingness to learn about aspects of the agency that are different from your current duties. Keep your eyes and ears open and your mouth shut. Put aside your 'business plan' for the time being and plan on doing your best job on someone else's dime, taking on more responsibility in your career path. Perhaps there might be an ownership opportunity in your current environment.

I do agree that there is no three ring binder on how to start an Insurance Agency, those starting out do need to have some creativity on their own. However there are guidelines that one can go by to Start an Insurance Agency and I have wrote a 9 page guide on this very subject which you can find on my website linked below. I see this reply was written back in 2010 and I know since this time it has actually become easier to start an independent agency than ever before thanks to the growing number of agency aggregators as well as technology, both industry specific technology and technology in general. Not everyone wants to be an employee, while some people are happy in their current situations, others are ambitious and want to move on. If the opportunity is there and one has the drive, nobody should be deprived of exercising their rights to the marketplace and going for their dreams.

[Frank_Medina_FMIA]

I encourage anyone with an entrepreneurial spirit to go after their dreams. Anyone who has started a business will tell you it is a lot of work and time spent building the business. However, the reward can be great with financial freedom and flexibility.There is a lot of risk starting a business as most new businesses fail within the first 3 years. Furthermore, do not let that discourage you from starting your business. Having capitol to invest up front helps with all the initial costs like office space, website, employee, management systems, etc. It is important to have a strong business plan and know how to adapt to our constant changing market. When starting a scratch agency I would recommend going independent so that you can have appointments with several insurance carriers. As long as you have 3 or more years as a successful producer with an agency then I do not see any issues getting the appointments. I started a scratch agency in Milwaukee, Wisconsin and made it to my second year. Insurance is very competitive, especially with auto insurance. Focus on your brand, what is going to make you different and always provide great customer service. I have found these tips to be useful in my agency. Good luck to all insurance agents whether captive, broker or independent.

Frank Medina, President
Frank Medina Insurance Agency Inc.
http://frankmedinainsurance.com

[pikappa552]

Starting an agency is not an easy undertaking. I started opening agencies in 1998 and continue to do so today. I have a few different groups that I am owner of that are dedicated to helping individuals start their own agency or become part of a franchise that offers more support. I encourage people to do their research on groups and franchises as they are becoming more relevant as the market shifts. Groups, Networks, Franchises, etc. can have a big impact on earnings, commission levels, and carrier access. Good luck to you and your business.

Regards,
Ryan Pegram
Superior Insurance Management Group Inc.
www.superiorimg.com
www.insuranceagencyfranchises.com

[TruRate]

As a new business owner/agent with a considerable amount invested we are very assertive with our marketing. I have seen many new agents fail because they considered themselves office professionals and could not bring themselves to do the activities to maintain consistent production: cold calls, door knocking, pushing past objections with ileads.

Last point, we leveraged existing relationships with captive agents in the area to generate steady referrals. We write 2-3 new households a month from referrals alone. They often start as monoline since our agreement prevents immediate cross sales but it generates traction. Know what they can/can't write and make it easy for them to send it your way.

EDIT: Just realized this is a 5 year old post. Just the same hope the info helps someone.

[kmd847]

Good for you and I hope by now you have realized your dream. Is it hard work you bet. is it worth it - again you bet.
go in with your eyes wide open and have a strong partner like SIAA and you will succeed. they have an amazing track record with start-up agencies