Starting an independent insurance agency gives you an opportunity to be your own boss and get the satisfaction of growing your business. It lets you choose which products to offer and allows you to set your own schedule and rules. However, it also takes a great deal of work, especially in the beginning. That hard work will pay off in the end, but first, you need to know how to go about starting an independent insurance agency.
Start With a Business Plan
One of the first steps to starting an independent insurance agency should be to create a business plan. This will help you formalize your thoughts and put everything in order. The business plan will also help you attract investors, insurance carriers, and employees.
As you create the business plan, you will notice that you set clear goals, identify risks, find ways to avoid obstacles, and determine your resource and financial needs.
You won’t be able to start your insurance agency without capital. There are several options for this, with small business loans being a popular option. You can also look for investors.
Select a Legal Structure
You will also have to decide on a business structure early on. You can choose from a sole proprietorship, a limited liability company, a partnership, an S corporation, or A corporation.
While sole proprietorships are the simplest, they also put your personal assets at risk. Corporations and LLCs are a bit harder to set up but protect your assets. Carefully weigh the pros and cons of each structure before choosing which one is right for you. We recommend working with a good attorney for this piece!
Take Care of Registration and Tax ID Numbers
One of the most important parts of starting an independent insurance agency is to register your name and get your tax ID in order. When choosing a name, make sure to choose something that is easy to find, shows off your agency, is easy to spell and say, and meets any requirements of your state. Don’t forget you can also opt for a “doing business as” name.
After you register the name with the state government, you can get a tax ID number from the IRS. Depending on your business structure, you may skip this step and use your social security number instead.
With your tax ID in hand, you can register your agency with the state’s insurance commissioner.
Take Care of Permits, Licenses, and Insurance
Make sure to get your business license and any other permits or licenses that your state requires for an independent insurance agency. The requirements vary slightly by state.
This is also the time to get insurance for your business. As an insurance agent, you likely understand the importance of various types of insurance. Consider errors and omissions insurance and general liability insurance, at the minimum.
If you ever use your car for business, part of starting an independent insurance agency also means confirming that your car insurance policy covers this. You may need to add hired and non-owned insurance. If not, you may need to get a business vehicle and commercial auto insurance.
Get Access to Insurance Companies
At some point before you start selling policies, you will need access to carriers. This involves making an appointment and typically requires you to show your business plan and marketing plan. It’s also helpful if you have a background in sales, both to “sell” yourself to the insurance company and so they believe you can sell policies to clients.
The biggest challenge for new insurance agents will be gaining access to major carriers. While some smaller insurance carriers will likely be willing to work with you initially, none of the major ones likely will. Instead, your best option is to look for an agency network for independent insurance agents, such as SmartChoice. Then, you will eventually have enough history with those major insurance carriers to approach them solo.
Make Your Technical and Software Decisions
One of the most important and often overlooked parts of starting an independent insurance agency is choosing the software and technology you will use. You will need systems for marketing, customer relationship management, and day-to-day operations. The right insurance agency management system can help with all of these.
Do some research before choosing which systems to use, as there are various options available. The two most important considerations are that your chosen programs have all the features you need and that they all work together. If you are interested in learning more about the Jenesis system, request a demo!
When you start your insurance agency, it may be tempting to start by hiring other agents to help you. However, experts suggest you instead focus on hiring support staff so you can free up your time to produce. It is common for the founder of an agency to be the most talented there when it comes to sales. So, by hiring people to handle various administrative tasks, you can focus on sales and expanding your business. That being said, don’t rule out the idea of hiring another agent for a part-time position if your agency requires it.
Make It a Point to Stay Up to Date
Right from the beginning, independent insurance agencies need to make it a priority to stay up to date on relevant subjects. The most obvious of these is any changes to insurance or regulations. However, you also should make it a point to stay up to date with regular reading on agency best practices, marketing strategies, hiring, and more. Aim to constantly grow your knowledge of everything related to your agency. With all of this in mind, you will be prepared to start your own agency.