Getting a carrier appointment for a new independent agency is not easy. Carriers want to see an existing book of business or a commitment to a certain premium volume within a certain time frame. Hence, the option for Startup Agencies is to be a part of some sort of an Agency Aggregator.
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If your line of thinking is you want to be completely independent, please note that this will not work to your advantage because you are limiting your ability to represent a number of carriers as well as the more well known carriers.
Even agencies with premium volumes of over 10 million are often part of an aggregator because it impacts them in a positive way, including having more carrier appointments and being able to get profit sharing earnings from being part of a larger group. However, if you still insist you want to go at it on your own, there may be options. These options will probably not be a lot different of a situation than a captive agency, though you may be able to grow out of that situation if you are able to significantly grow your agency.
Most will want to see your business plan as well as your previous loss ratios, especially if they are well documented (such as with captive agencies) and the numbers look good.
You should also include 5-year projections along with production goals. Consider approaching regional carriers as it will probably be difficult to get an appointment with a national carrier. Because these carriers would want to see good volume from you, it is recommended that you only get one or two preferred appointments at startup since you will need to meet the carrier production requirements. Some may have programs for startup agencies, but this is not very common. Because of these limitations, it’s best to read the next section on Insurance Agency Aggregators as this is truly the best way to secure a portfolio of carrier appointments.
Insurance Agency Aggregators
There are all kinds of agency aggregators across the U.S. and even worldwide. Many of these groups refer to themselves as “clusters,” but there are also franchises, alliances, and networks. Regardless of what they call themselves, they are basically master agencies; that is, a group of retail agencies under one master agency code. Most carriers now recognize these organizations, further giving sub-codes to their member agencies.
“Being in some type of aggregator is essential for the small to mid-size agency in the current marketplace. In most cases, an aggregator will provide you with all the carriers you need.”
More often than not, a sub-code shows the member agency name, not the master agency name. For the few carriers that don’t sub-code, it will show the master agency name, though this recently has not been the norm. Having a sub-code, as far as the client is concerned, is as good as having your own code, most especially since your agency name is listed on the declaration page.
Most of these organizations are open to admitting startup agencies, though some may be restricted to those who operate an existing agency. Some have minimum requirements to join and require only established agencies with a minimum premium volume, while others have programs for startup agencies. Many of these groups have an initiation fee to join, often several thousand or more. Monthly fees can vary too, from a percentage of commissions to a fixed monthly fee, or a combination of both. Typically, a prospective member completes an application process that is then reviewed by the decision makers of the organization.
You may need to submit a business plan or an agency profile report along with the application. Some groups may require previous loss ratios; the last thing these groups want is an agency with a history of high loss ratios. If you have had some great loss ratios as a captive agency, I would include this information, as it can only help your case and demonstrate that you are a good underwriter.
Being in some type of aggregator is essential for the small to mid-size agency in the current marketplace. In most cases, an aggregator will provide you with all the carriers you need. These groups will negotiate with these carriers and in most cases they distribute profit sharing back to their members. Speaking of profit-sharing, it’s very difficult for a smaller agency to meet minimum requirements to achieve it. Master agencies allow a group of smaller agencies to combine their volumes. Most of these organizations claim a certain percentage of the profit-sharing and often return a higher percentage of the share back to their members, based on a certain formula.