The Four Fundamentals of Starting an Insurance Agency

Striking out on your own as an independent insurance agent can be a fulfilling, exciting and lucrative experience.

Insurance is a relationship business. There's satisfaction in protecting individuals, families and businesses from some of life's calamities. Insurance sales can also be lucrative. By recruiting associate agents, you build residual wealth while offering income opportunities to others. And the freedom and flexibility as are unparalleled.

As with any commission-based business, you must get your agency off the ground quickly. Following are four fundamental steps that will give your insurance agency a strong start:

Obtain the Necessary Licenses (if new to the business)

Books, online courses and training professionals can help you prep for your state's insurance exam. Separate exams are required for life and health and for property and casualty. Uniform licensing standards and reciprocal licensing between states are becoming more common, allowing you to get licensed in more than one state fairly easily.

Part Ways Gracefully with Your Existing MGA or Captive Agency (if already in the business)

Determine whether your agreement included a non-compete clause. (An employment law attorney can advise you on whether it is actually binding. Many times, such clauses are not.) Find out whether you own, and can take with you, any portion of your book of business. If so, this becomes a good foundation for your own agency.

Set Up Your Own Agency Business

Decide on an official business structure (corporation or LLC) and file the appropriate paperwork with your state. Find an accountant to help you with commission breakouts and other bookkeeping aspects of your business.

Select the Right Master General Agency (MGA)

MGAs provide administrative, marketing and sales assistance to hundreds, sometimes thousands, of independent agents. A good MGA can help you grow your businesses faster. That's because they provide access to large, well-known insurance companies and top commission rates.

Be selective about who you partner with. A quality MGA should offer you:

Broad product portfolio, with multiple insurance lines to meet your clients' personal and commercial needs. Contingency bonuses, paid to the MGA by carriers for producing large volumes of business. Not all MGAs share these bonuses. Confirm the MGA's willingness to split contingency bonuses with you, or find someone else who will. "Same team" philosophy-The MGA should not allow agents within the same geographic area to compete against each other. Your fellow agents should feel like teammates. Carrier appointment paperwork-With some applications running 40 pages in length, your MGA should handle this cumbersome paperwork on your behalf. Marketing support/digital and traditional-Leading MGAs provide turnkey systems for both traditional marketing and digital marketing (e.g., e-marketing, social media, website development, SEO and pay-per-click campaigns). Business coaching-MGAs have a wealth of industry expertise, and they should be willing to share that with you. They can help you avoid start-up pitfalls and maximize your income. Fully integrated technology-The best MGAs have invested in agency management systems that make you more productive. Their system should include a comparative rater for quoting multiple carriers, e-mail marketing system, lead generator, online training and more.

With the level of automation and support available today, there's never been a better time to be an independent insurance agent.

About the Author: Pamela McCann is partner and chief operations officer of Alliance Insurance Group, an independent insurance agency based in Golden, CO. Her current responsibilities include streamlining Alliance's insurance agency management systems. She also spearheads Alliance's Master General Agency initiative, recruiting independent agents who are interested in starting an insurance agency. Throughout her 30-year career, McCann has held a variety of corporate financial roles, ranging from chief financial information officer to controller. In those roles, she was responsible for negotiating business insurance and employee benefits. She is a licensed producer in the state of Colorado.