How to start your own insurance agency business

How to start your own insurance agency business

Do you want your own insurance agency? you have a lot of work ahead of you, even if you are already an authorized agent. this guide helps you combine your natural entrepreneurial nature with your love of insurance to get started.


Assuming you’re already a licensed agent, you still need a general business license. your local municipality website has details on how to apply. you can operate under your own name or form a business under another name (see #4). register your name with the state government, too. then get a tax identification number to file your taxes. As a sole proprietor (also see #4), use your social security number. partnerships and corporations apply for federal employer identification numbers. Once you get your federal tax ID, your state insurance commissioner’s office has a checklist for registering as a resident business entity. this is how you pay state and local taxes.

capital or financing needed (or recommended)

Start-up capital is always required for a new business. Some successful agents start with as little as $5,000, while others start with $50,000 and fall short. Your business expenses are as unique as your personal expenses.

For example, starting as a home business means no rent, no expensive signage, and you probably already have furniture in your home office. office spaces and storefronts differ as much as the price of houses. an office in new york can’t compare to one in rural texas.

necessary insurance protection (e&o) general liability

an insurance agency needs insurance. Adequate business owner’s policy (BOP) liability coverage is especially critical if your agency is sole proprietorship. Some states require professional liability insurance or error and omission (e&o) insurance to initially register the business.

You need to get a bond. guarantees to pay if you don’t. this protects your clients if you charge a premium but never refer it to the insurance company.

knowledge and experience

insurance designations

To open an agency, you must first be a licensed insurance agent. standard bearer designations are:

  • chartered life underwriter (clu) – life insurance
  • registered health underwriter (rhu) – health insurance
  • Property Casualty Licensed Underwriter (CPCU) – Property Casualty Insurance
  • These designations are considered experts in insurance underwriting, administration, and regulation. Courses to complete these designations provide insurance professionals with in-depth education in areas such as marketing, management, and underwriting.

    find an insurance mentor

    former secretary of state condoleezza rice suggests looking for role models who are interested in your career. she warns against being too specific in her requirements. be clear about what she’s looking for and then ask them directly.

    • tell them why you admire them.
    • explain your goals in the mentoring process.
    • describe how you imagine logistics to work.
    • legal structure (llc, inc, sole proprietorship)

      The structure of your business determines your personal liability.

      • sole proprietorship
      • society
      • corporation
      • limited liability company (llc)
      • s-corporation
      • each has benefits and risks. sole proprietorships are the simplest structure but carry the most personal responsibility. Business debts can be collected using your personal assets if your business runs out of funds. (Your business insurance should cover this!) Corporations and LLCs create a legal distinction between the agency and you. For more information, see the US Small Business Administration’s Choose Your Business Structure article.

        choose a physical location

        You have three options for your location:

        • work from home – no ongoing rent
        • Retail Space Leasing: Ongoing Rental Payments
        • purchase a building or business unit – ongoing mortgage payments
        • the choice is likely to be obvious.

          does it matter if my location is near another insurance agency?

          Commercial locations such as malls or business centers may limit the number of agents. otherwise, common sense rules. check a map of your area and see where all the agencies are now. look for an obvious gap. if there isn’t an obvious hole, do what you can to slip between the others. stay as far away as possible and stay close to customers.

          staffing: Hiring and firing employees. keep staff motivated.

          In general, an insurance agency includes these basic staff positions:

          insurance agent (producer): a qualified sales representative who provides quotes, sells policies and renewals, clearly communicates policy information to clients.

          customer service representative: answers incoming calls and keeps track of the daily activities of the agency.

          Marketing Specialist: The Marketing Specialist conducts market research, creates and edits social media posts, and uses paid advertising campaigns to expand brand awareness.

          Office Manager – Oversees agency operations, manages staff, and reports to agency owner.

          each role can be performed by one person, or one person can perform many roles in a smaller agency. most small agency hires are random, but it still seems to work well. Post a position on a local job board, submit resumes, conduct interviews, and add a new team member. Using a specialized recruitment agency, even with fees, is often worthwhile for jobs that require higher qualifications.

          Motivation waxes and wanes in most lives, but it can be even more difficult to maintain in a small insurance agency. Setting goals for the agency and setting individual goals helps keep staff motivated. setting rewards has more of an impact than the reward seems to justify. the promise of a staff dinner at a favorite restaurant or an exclusive paid trip keeps your spirits up for months!

          find new customers and keep current ones happy

          finding new clients has thousands of approaches. an online presence includes:

          • website
          • emails
          • social networks
          • blog
          • videos
          • offline marketing includes even more components.

            • cold calls
            • networks
            • print publications
            • commitments to talk
            • direct mail
            • advertising
            • associations
            • trade fairs
            • buying leads
            • references
            • Once you contact a new lead, your sales process takes control. Modern customers expect ongoing communication, usually through the occasional email or social media marketing. renewals become automatic with ongoing relationships.

              get customer references

              The main reason insurance agents don’t get referrals from their clients is because they don’t ask. he feels uncomfortable, so nothing is said. when is the best time to ask? right after a customer signs on the dotted line. a new client, or a renewal, at the moment of decision, has a positive attitude and is more likely to make a referral at that moment.

              what do you say? try something like, “if a friend of yours walked into the room, right now, would you introduce me…knowing that you would probably talk to him about his insurance needs?” Once they agree, ask them, “Would you text those people and let them know I could help them?” then follow up in a few days.

              Even if the client says they don’t know anyone at all, you have exactly the same number of referrals you had without asking. zero. ask. there’s nothing wrong with asking!

              marketing tips: what works and what doesn’t

              Marketing includes many elements, but time and money constraints make it impossible for most agencies to do everything. this is what works best

              social networks: your facebook, twitter, linkedin, google and youtube accounts demonstrate how you are different from the competition to your current and potential customers.

              seo – seo is essential. Small agencies may have a hard time ranking and competing on Google with local agencies and national brands, but the time, money, and effort are well worth it.

              note: it may take up to 12 months to see substantial results!

              networking: get out there and be seen! see where your customers are.

              build referral partners with real estate agents, lenders, bankers – use your skills and networking opportunities to build referral partners. the chamber of commerce and other national or local business organizations help develop cross-industry connections.

              Volunteering helps develop your standing in the community. Although it is impossible to measure the short-term effects, in the long term, his reputation is critical.

              Adapt to market trends: Some trends move quickly and pass without much impact on the core of the market. other trends take root and change the way the industry base works. Don’t be swayed by wacky trends, but it’s vital to recognize a trend when it’s here to stay (ie seo, social media, etc.)

              technology: software, agency management systems and quotation systems

              automates everything possible. invest in the best agency management software. use it to keep track of potential customers and to provide ongoing service to current customers. look for the option to access multiple operators in online applications to save paperwork, time and stress.

              The software keeps you in compliance with the laws of your state and helps facilitate marketing, customer service, and sales. rented software packages for between $50 and $350 per month, depending on features.

              quotes from insurance companies

              No insurance can be sold without access to insurance companies. These insurance companies want profitable long-term relationships. being appointed requires:

              • experience in the insurance business
              • a solid business plan
              • marketing and sales proven track record
              • geographically desirable territory
              • Ideally, secure a direct quote with an established carrier to offer competitive products, with a solid commission schedule. For a new insurance agency, direct quotes are hard to come by, as most insurers prefer experience, a track record, and a book of business.

                general insurance sales? car, home, life or business?

                answer these questions:

                • Do you already have an approach with your clients?
                • what are your most feared competitors doing?
                • The day you open your new agency is not the first day of your insurance career. you’ll have enough change to deal with, don’t change your sales approach. however, at least. unless you’re competing with a feared competitor that makes it impossible to imagine your market share. even then again, maybe later.

                  cross-selling opportunities

                  The most common reason customers don’t take advantage of the opportunity to purchase more than one policy from their agent. they were never asked. create packages, discounts and incentives for customers. Most importantly, create packages, discounts, and incentives so you (and your staff) feel comfortable asking. offering a discount is easy. make cross-selling opportunities as easy as possible.

                  start from scratch or join a cluster (imo)?

                  An insurance group is a formal association established to provide group benefits and mutual support. When you join a cluster, benefits include cost savings to help build your business and profitability faster. you can get new leads, products, and resources, such as marketing, technology, or staff support.

                  Insurance groups negotiate agreements with major insurance companies. the benefits they offer vary, as do the membership requirements. the biggest concern may be your ability to join. not all clusters accept new agents. others restrict you until you reach various levels of achievement and experience. There may also be an initiation fee of several hundred to thousands of dollars plus an ongoing membership fee.

                  so should you join a cluster? investigate to see what is feasible and then decide. there is no easy answer.

                  write business and marketing plans

                  You may be asked for a business plan. perhaps by your bank or insurance company with your quote request. your marketing plan will likely be shared between you and your territory’s marketing representative.

                  Both plans should always be a work in progress. Your business evolves over time with influences like the economy and market trends. successful businesses maintain current business plans to track every element that affects continued growth.

                  Here is the united states small business management guide to writing a business plan. forbes published a template for a marketing plan.

                  when can I expect to be profitable?

                  It would be nice to start making money the day you open your doors for business. experience suggests that it takes some time to start generating enough income to become self-sufficient. therefore, allow at least a few months of cash reserves in your startup costs. Setting aside cash for rent, salaries, utilities, marketing, and any other expenses reduces stress and makes work easier. it’s hard to sit across the table from a client when you’re worried you’ll be forced out of business before you even really start.

                  when is a good time to expand operations?

                  Rarely does an agency expand its operations too soon. here are the signs that it was probably a good idea to expand a few months ago:

                  You lose time on non-essential tasks: Every day, the backlog of work is greater than the day before. Administrative tasks bog down critical revenue-generating activities. marketing and sales are often the first to suffer.

                  customer service: Complaints from customer service about long wait times are a big clue. Are ongoing customer service efforts falling by the wayside? emails, letters, social networks? Are renewal rates low?

                  overworked staff: Assume your staff is doing their best to keep up, and then ask. It should be obvious when employees struggle with the demands of their jobs. look for increased stress, lack of attention to detail, requests for time off, or more sick days.

                  check the books to make sure you can afford to expand. a conversation with your accountant is in order. Hiring more staff helps tackle tasks more efficiently, but your budget is critical. Consider hiring freelancers or contract outsourcing for specific projects to ease the burden on staff without hiring more employees.

                  build and maintain company processes

                  every insurance agency revolves around a multitude of processes:

                  • sales
                  • references
                  • new business
                  • policy reviews
                  • search engine optimization (seo)
                  • re-quote follow-ups
                  • cross-selling
                  • social networks
                  • renewals
                  • hiring
                  • training
                  • termination
                  • telemarketing
                  • claims processing
                  • policy approval
                  • billing inquiries
                  • customer complaints
                  • content creation
                  • Please read this list again carefully. think about your processes. Is each process formalized? if not, what problems does that create? many agents find it worth spending time thinking through these processes and writing down the steps. if you have staff in charge of some of the processes, ask them to write down the details.

                    once you have the steps, it will be easier to find ways to save time and money. ask yourself, “how could we improve the efficiency of this process?”

                    why insurance sales are lucrative

                    The US Bureau of Labor Statistics explains that opportunities for insurance agents are growing faster (10%) than for the average job (7%). It’s no wonder, as our nation is underinsured. Over 40% of Americans do not have life insurance of any kind!

                    why the high turnover in insurance sales?

                    Insurance sales are fiercely competitive. perhaps enough in itself. Furthermore, insurance sales require a unique skill set that not everyone develops. the outgoing and friendly nature that makes connections and “exposes oneself” opposes the other side of the agent equation. Agents must also be detail-oriented, conscientious, and focused. many agents fit on one side of the equation and not the other, so they find another type of job that suits them better.

                    pay producers

                    us bureau of labor statistics. uu. reports that median salaries for insurance agents are $48,150 per year. the top 10 percent paid agents earned more than $116,940 a year. the lowest paid 10 percent earned less than $26,120.

                    working hours

                    As an independent agent, your time is yours. maybe. like other entrepreneurs, you work overtime many days, at least at first. Over time, your business becomes self-sufficient and you can take a step back. or you could take a step back if you wanted to (many aren’t!)

                    build a profitable business book

                    over time, develop a clientele with regular renewals. A business book covers these clients and their policies. every year, your book grows. as long as you are active, this book constitutes your income. when you choose to step back, this book shapes the value of your company or your legacy for succession planning.

                    sell a business book: how much is it worth?

                    Your book of business is valued based on the annual gross commission. a book valued at 1.5x means the book is valued at 1.5x the annualized gross commission.

                    receive payment for your book of business

                    payments for a business book range from 1x to 2.5x or even more, depending on the payment method and the buyer’s motivations.

                    lump sum payment: you earn a lower multiple, probably 1.5x to 2x. if you want all the money at once, this is a good option.

                    Payments over time: Guaranteed payments, like a pension, are a sure thing. even if your buyer loses the entire deal, you still owe every penny during that time.

                    pay-as-you-earn: much less risky for the buyer, since if the book doesn’t make money, there are no payments. but if the business grows, he earns more. this book may be valued at 2.5x+.

                    succession planning for agents ready to retire

                    Succession planning is like retirement planning. must be completed ahead of time. estate planning that begins on his 64th birthday when he plans to retire at 65, it’s too late. any route must start at least 5 years before the transfer date. at least.

                    Millennial and Gen X shoppers might be your best fit. Some baby boomer agency owners choose to go with large national brokers or private equity firms over these younger buyers.

                    Although they don’t reflect your expectations, these next-generation owners may more closely reflect the expectations of their customers. therefore, start the estate planning process well before you even consider retirement.

                    What are the two main reasons succession planning is a problem?

                    • the next generation of leaders is not being trained.
                    • there are no well-established transition plans.
                    • find your successor, train him and develop a strategic plan. be proactive. choose your destination and maximize the value of your insurance agency.

                      Starting and maintaining an agency requires dedication, drive and ambition. Most importantly, your ability to connect with your customers and your community drives your success. As a leading member of both the insurance industry and your neighborhood town, you can make a great living while doing what you love.

                      there is a lot of work ahead, but you can have your own insurance agency near me. this guide should help you gather your entrepreneurial talents to get started.

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