Starting a new insurance agency firm requires the same skills and commitment that any other business demands. Planning, persistence, and consistence are the key factors for success in any business venture. There are certain important considerations that differentiate the insurance agency business from other business ventures.
Legal Licensing: To become an insurance broker (producer) you must be licensed for the lines of insurance business you intend to transact as an agent. For example, selling life, health, property or casualty, or a combination of those requires state licensing. Consult with the department of insurance of the state where you intend to do business for the proper licensing/ bonding requirements. If you plan to be brokering insurance to clients in different states you need to obtain a license from those states as well.
If you intend to run the business as an incorporated business (very much recommended), you need to obtain the proper article of incorporation, and then apply for an insurance producer license for your new business entity. In the state of Illinois you can incorporate yourself online, and it can be done on expedited basis (overnight).
Now, after you, the individual producer, and your business entity are properly licensed with the state(s), you will need to find a location. You can start by looking around to share space with other professionals, such as accountants, real estate agents, travel agents, or lawyers. Sharing an office is good in the beginning because it saves you rent expense and because it exposes you to the traffic that you need. If your budget allows you to rent a separate space, choosing a busy mall is the best idea, especially if you will be focusing on auto insurance and business insurance. Heavy traffic is free advertisement.
At this point you will be able to sell insurance. The issue is what insurance to sell, which can be confusing. Many agents find it hard to focus on more than 1 or 2 lines of insurance. Selling life insurance requires great deal of salesmanship, however the commission is the greatest. Selling health insurance still requires salesmanship, average demand, the commission is good and so is the renewal. Business insurance is easier to sell (most businesses must have insurance), the commission is good, but it requires experienced customer services. Selling auto/ home insurance is perhaps the easiest, the commission is the not as great, and it requires extensive customer services.
Selling insurance as an independent broker may be done through different ways: First you might seek appointment directly with insurance carriers. It is very easy to get appointment for the life and health insurance lines, but when it comes to auto and commercial insurance, appointment with insurers get little more difficult. Most property and casualty insurers require experience, and Errors and Omission coverage for your business. Errors and omission (E&O) for life and health agents is easy and inexpensive to obtain, but when it comes to errors and omission for property and casualty agents things become tougher. Experience, education, and character are very important when obtaining errors and omission coverage, which is certainly much more expensive than E&O coverage for life and health brokers.
Most companies, especially the reputable ones, will stay away from agents without experience. That is why you should target less known regional or local companies for appointment. Also, you can approach a local broker who will accept to place your business under their contract and share with you the commission (you get the experience and the access to the insurance carriers.) Many larger brokers and MGAs (Managing General Agents) are willing to do that.
Marketing your brokerage business is the most challenging task. There are lots of great brokers and agencies in the market place, therefore there has to be something different about you and your agency for people to become your customers. Why do people need to come to you and become your customers? The answer to that should be the backbone of your marketing campaign.
You can design very complicated and expensive marketing campaign, but always keep in mind that advertising an auto insurance agency is not the same as advertising a life insurance agency. Selecting the target market is very important because it will determine the which product to sell (ie standard vs non standard auto), and it will determine the marketing campaign (newspapers ads, direct mailing, TV commercials, internet, etc.)
Regardless of the size of your agency, your staff will make you or break you! Proper recruiting, training and incentive oriented compensation are the keys to the success of your business. Your employees are your connection with the customers.
Required Capital: A starting agency needs between $ 15,000 to 50,000 for initial setup, and marketing startup. This includes signs, computers, printers, fax, scanners, files, advertising materials, office furniture, licensing, and minor remodeling.
The following are some sources that can help in getting you started:
Find the requirement to get your insurance license (individual and business entity):
Check your state's Department of Insurance
In Illinois: http://www.insurance.illinois.gov/producer/producer_information.asp
Find how to get your FEIN online:
Check the IRS website at https://sa2.www4.irs.gov/modiein/individual/index.jsp
Find how to incorporate yourself online:
To do it yourself, check your state website. You also can have a bookkeeper or a lawyer (for a fee) do that for you.
In Illinois: You can incorporate yourself online at http://www.ilsos.gov/corparticles/
Some online brokers that give you access to preferred markets:
Insurance Noodle (http://www.insurancenoodle.com) and Agent Secure (http://www.agentsecure.com) are two national agencies that will allow you to get access to preferred markets. In Illinois check http://www.insurancenavy.com
Providers of Errors and Omission Coverage:
US E & O Brokers- http://www.useo.com/
In Illinois: See http://www.insurancenavy.com
Get lists of companies to deal with/ software to manage your agency and MGAs to place business with:
Check the website of the Ultimate Insurance Links at http://www.ultimateinsurancelinks.com/
Finally "Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude. " Thomas Jefferson.'
Founder of Insurance Navy, a leader in the commercial insurance, with several locations in the Chicago area.
Orignal From: How to establish and insurance agency
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