Becoming an independent insurance agent is a great business choice. There are a lot of perks of opening up your own business - flexibility, unlimited earning power, and no boss over seeing your day-to-day. But there are also hidden costs associated with setting up your company the right way.
What Does an Independent Insurance Agent Do?
Independent agents sell insurance products, such as life, heath, auto or home insurance. These products typically come from specific carriers but as an independent agency, you are able to offer your clients a wide range of well-rated carriers that fit their needs and budget. Agents work off commission on the products they sell, and some companies such as SAI offer renewal commissions as well.
To thrive as an independent agent, companies like SAI work with new agents to set-up their own company under an LLC, train and connect them with carriers, and often ask them to pay into a pool for their insurance and technology needs. Independent agents are not paid a salary and work with companies to build their client database.
Getting Licensed
To sell insurance in each state you must be licensed. Some states allow you to transfer your license but some do not. Each state has specific requirements.
The studying doesn’t stop once you finish your exams - there are products and carriers to learn as well. You will also need to continue to keep learning about updates, regulations and stay on top of state changes. If you decide to go the independent route and work with a company such as SAI - there may be on-boarding opportunities as well continued learning provided at the company. These are an essential step up for most newbie agents.
Start-Up Costs
As your career progresses, you may have the opportunities to have a lot of flexibility on when, where and how you work. Independent agents come with a lot of perks but there is a few real steps you need to take to protect yourself.
If you start with an independent company they may have you set-up an LLC and EIN number. These are pretty quick and depending on the state, cost under $100.
Many companies such as CIB will help you set this up. You may also be asked to sign a contract as an independent agent - be sure to read the details and make sure you stay in compliance.
Many companies now require on-boarding fees as well. These fees cover the time for the managing team to spend hours teaching you their carriers, technology and marketing. Many have started to ask new trainees to really pay this up front, to guarantee their time and investment in the company.
SAI for example has a week long training with 4 - 8 hours a day - depending on the candidates needs. We focus on the basics such as how to quote, but also set up introductions to all our carriers and make sure they have the business basics as well. We go over items such as equipment, mail and business cards - but also networking and where do you go from here with developing lead sources.
Some companies also require a monthly fee to use their Agency Management System and sometimes will group it with E&O insurance to save their agents money.
Agency Management System
With many types of business there are specific types of insurance, programs and specialized tools that are required of the job. For Realtors, many need access to the MLS (sometimes multiple) and this is a cost they are expected to cover. For insurance, there is Agent Management System software.
While not required, it makes quotes and helping clients infinitely easier. Programs such as Easy Lynx connect to an online database to provide quick estimates for clients as well as organize clients. The software is especially valuable if you are a newer agent as many of the functions built into the software are designed to keep you in compliance with the law and help agents sell and market to their base.
Software is typically leased, and can range from $50 - $350 depending on it’s features.
Insurance
It may sound a little odd, but to sell insurance you have to have insurance. The least you will need is a Business Owner Policy and Errors and Omissions insurance.
Many companies may group their agents together and offer a bulk plan that keeps them legal and good to go. This is a great option for independent agents as it ensures they are covered.
If you grow and continue to build your business, you may need additional policies so be sure to review state guidelines.
Buying a Book of Business
The quickest way to hit the ground running as a new agent is to buy a book of business from another agent. The book in this sense, refers to a client list and their associated policies. When you purchase a book, the selling agent transfers the accounts to you.
You gain a book of clients - renewals and any new commissions from the list but clients are under no obligation to stay with you under the switch. The cost per policy varies and can depend on the market, commission and renewal rate.
Generally speaking, it can be a risk to purchase any list and many companies will help you build your own. SAI for instance, offers many marketing tips, resources and on-going webinars to help you build your own book of business. We find it better to build your own list and vet them out, vs. picking up emails who may have never heard of you.
There’s so much more involved with building your insurance business! For the most part, this article hits on some of the expenses you may face in the beginning as well as recurring monthly cost - but if you are interested in taking the leap to build a recession-proof business you can manage, get in contact with us at SAI, we are here Monday through Friday, from 9:00 AM to 5:00 PM to assist you throughout the entire process.