10 Steps to Opening an Independent Insurance Agency As an independent insurance agent, it can be incredibly frustrating to be limited in the number of carriers you have access to. The reality is that to truly succeed in the insurance industry; you need to partner with a group that has established relationships with the carriers you want to work with. Without these partnerships, you will be unable to access the carriers you need to provide your clients with the best coverage and service. If you are looking to join an insurance group that provides complete support, ICA/SIAA has got you covered! With access to 30+ companies and competitive markets, you can become a significant producer in a short time. We also offer training and education support, staff support, digital & print marketing, We understand that it can be hard to get the appointments you need to get started, which is why we provide our members with the support they need to succeed. With access to multiple markets, higher commission rates, additional compensation opportunities, profit sharing, and marketing support, ICA Agency Alliance, Inc. is an excellent choice for independent agents looking to take their business to the next level. Contact us to schedule a discovery call: https://www.icaagencyalliance.com/contact-us
10 STEPS to Opening an Independent Insurance Agency
Opening an independent insurance agency is hard to do alone. It takes time, patience, and of course, money. None of this happens overnight, but rest easy because ICA Agency Alliance, Inc. is here to help! A guide for licensed insurance agents looking to become independent.
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Steps to Opening an Independent Insurance Agency Successfully
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Always Start with a Business Plan Plan Your Future and Measure Your Success
and family, joining a lead group, print or digital advertising, associations and interest groups that you have access and all other creative sources available to you. Hint: internet referrals are difficult to convert to sales – other sources are more reliable. A majority of the insurance companies want you to provide a business plan before they consider you for an appointment. Your success is determined by the relationships you have with your customers and the insurance companies that you represent as an agent.
A well thought out business plan is the best way to start any new business venture. It is your roadmap to success; use it to plan out your short-term and long-term goals. Without a plan, you are sure to run into a few dead ends. As an independent agency owner, you must identify your target market and your competitors. Know what makes your agency better than your competitors. Analyze your risks and include an initial budget, cash flow projections, and a production plan to ensure growth in the future. Determine how you will acquire your customers: referrals from friends
Steps to Opening an Independent Insurance Agency Successfully
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Choose Your Business Structure Keep Personal Liability in Mind
Do you want to separate your personal assets from your business or take the risk and be a sole proprietorship? Your business structure affects daily tasks for your future like how much you pay for taxes, additional paperwork to fill out, additional entity licensing, state registration and maintenance, and other factors. These are questions only you can answer, so be sure to take time and do your research to weigh out your risks. We suggest talking to a legal counsel to see what type of risk would best suit your situation.
Types of Legal Structures for an Agency
• Sole Proprietorship • Partnership • Limited Liability Corporation (LLC) • Corporation • S Corporation
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Choose Your Agency Name Take the Time to Research Names for Your Agency
Agency Entity Name: This route takes the longest to be approved and issued by the Department of Insurance but is often the best option. Check and make sure that your business name is approved with your State’s Secretary of State Department, Department of Insurance, and the local city, or county municipalities when your entity has been accepted. File your paperwork, including federal and state tax IDs (FEIN#) and get your entity established. Once your state has approved the entity, you can now apply for an agency license with your state’s DOI. Fill out the paperwork online, pay fees, and wait. Once the license has been issued, this name will appear on policy declaration pages and company websites. Example: John Smith Insurance Agency, Inc.
Your insurance companies will use this name as the agent for the policy. This will become your identity as the agent to your customer. Insurance companies will only appoint a licensed entity or individual. In some states, the wait time to get an entity license with the Department of Insurance can take up to 4-8 weeks. Personal Name: As an example, you are already licensed under “John Smith” [replace with your name]. John Smith is what will appear on the policy declarations page and company websites. This is the fastest to begin selling insurance. Personal Name with DBA [Doing Business As]: You would now be “John Smith DBA Smith Insurance Agency.” John Smith DBA Smith Insurance Agency is what will appear on the policy declarations page and company websites.
Steps to Opening an Independent Insurance Agency Successfully
Protecting Your Agency Errors & Omissions Insurance & Cyber Liability (Data Breach) Insurance
Errors and Omissions Insurance: As an Independent Insurance Agency owner you are expected, by virtually all insurance companies, to have an Insurance Agents Errors and Omission insurance policy covering your exposure as a professional insurance agent for you, your agency entity and your employees. Coverage is readily available with pricing based upon your experience level and the amount of premium your agency has written.
Coverage is complex and does vary
substantially by the insurance company providing coverage.
Most insurance companies request a minimum limit of
$1,000,000 on the policy, but coverage limits should be increased as the amount of agency premium
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written for customers increases.
Cyber Liability Insurance (Data Breach): As technology evolves and criminal activity with people’s personal information becomes a valuable and marketable item, many states are requiring all insurance agencies to carry Cyber Liability. Coverage requirement limits may vary by state, with some that do not require the coverage at this time, but often require a limit of no less than $1 million along with a $1 million aggregate and a deductible of no more than $2,500. The policy must include coverage for privacy liability, cyber extortion, business income, and digital asset restoration with a minimum $100,000 coverage for PCI DSS (Payment Card Industry Data Security Standards) assessment.
Steps to Opening an Independent Insurance Agency Successfully
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Get Two Separate Business Banking Accounts Guidelines for Banking and Handling Money
commissions should be deposited here as well as paying any office bills like rent, internet, and phone. The business account should be used for insured monies only. The insured gives you a payment, and you deposit the money into this account. Then the insurance company will “sweep” this money in a couple of days.
In order to keep your accounts managed, there are a couple of things you should do when setting up your business banking accounts. You will need to open an agency operating account and a separate business account to keep everything organized. The purpose of an operating account is to keep your money separate from the insured’s money. Your
Steps to Opening an Independent Insurance Agency Successfully
Choose an Agency Location Do you need a storefront location?
use to pull MVR’s, CLUE, and Credit / Insurance Score Reports used in underwriting customer applications for personal insurance policies.
If a new agent is looking for the benefits of a storefront location and the additional walk-in customers, then the site is a very important part of the marketing plan. If the new agent is expecting to attract new customers through contacts and appointments, then almost any office will likely be acceptable. However, there are some forces behind the scenes that are out of everyone’s control with restrictions on where and what kind of office you can occupy. This is called LexisNexis / Choicepoint. LexisNexis as further explained under steps 7 and 8, is the source that most insurance carriers
Without a “LexisNexis Node-ID,” the insurance
agent can’t pull those reports. It is extremely important to get your office set up correctly. Some carriers require the Node ID before they will
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appoint you. However, you must have one company willing to appoint you prior to applying for the Lexis Nexis Node-Id as a sponsor. Office Location: You need a traditional office with a suite number or designated address. Your office needs a secure door that can be locked when you are not there. It can’t be shared with anyone else. Working from home is acceptable as long as it is a single-family residence. The following have been deemed unacceptable in the past. Virtual Offices or multifamily residences,” apartments, duplexes, fourplex, etc.” Warning: The problem with a home address is that most carriers will not appoint an agent to work from home. The Pandemic opened up companies appointing working-from-home agents. The downside is that this will change back in the near future.
Steps to Opening an Independent Insurance Agency Successfully
Set Up Your Office for Success Essential Technology You Will Need in Your Agency’s Office
Internet: You will need access to high-speed internet. Virtually all communication with insurance companies and customers is done electronically. Because of the highly confidential
Phone: Your main office telephone should be a landline for a professional look and feel. So far, a VoIP (internet) phone has been acceptable by LexisNexis. Cell Phone: To use your cell phone as the primary line for LexisNexis you will be asked to produce a copy of your cell phone bill that has the same name and address that is on the original app you submitted. Fax: LexisNexis, believe it or not, still requires that you have a landline fax number. So far, eFax services have been acceptable. Your agency’s name and address along with your fax number must be printed at the top of the fax, both outgoing and incoming.
information acquired by insurance agents
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for their appointed companies, insurance regulations require that a high level of security be used when transmitting data. Cyber Liability insurance will help if a covered claim should arise, but it is the sole responsibility of the agent or agency to make sure all proper security measures are taken. Adequate security will include anti-virus, malware, ransomware, and other protection on all your electronic devices used in the agency. Electronics: All professional insurance agents must have adequate computer capability to perform many functions, including policy and customer management, email, voicemail, and rating programming. As the agency grows, a professional agency management system must be used to properly manage the multiple sources of information that is part of running an insurance agency daily. Desktop and laptop computers are great; cell phones are not.
Steps to Opening an Independent Insurance Agency Successfully
Make Sure You Are LexisNexis Compliant Know What LexisNexis is & Why You Must Have a Node ID
LexisNexis provides confidential information that insurance agencies and companies need to get for a complete underwriting picture of individuals, businesses, and assets with
Having your own agency’s account with Lexis Nexis in your agency’s name, exclusively, is one of the key elements that help establish your identity as a true independently owned insurance agency. With a permanent “Node ID” (account number) policies placed by your agency with the insurance companies are your policies. From the insurance company’s perspective, these policies are owned by your agency and not affiliated with any other organization or group. This is very important at the time you wish to exit the property/liability insurance agency business and want to sell the renewal rights to a third party.
industry-leading data and analytic solutions. Items
such as driving records (MVRs),
CLUE, and Credit/Insurance Score Reports. To secure your new agency’s temporary LexisNexis Node ID
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requires that you complete the application with 100% complete, accurate, and valid application. All the previously mentioned items in step 6 and 7 above must be completed and finalized before you can apply for LexisNexis. The information sent to LexisNexis by you must match exactly what is received from the insurance companies. Most of the operational use of confidential records provided by LexisNexis are federally regulated, and you must agree and abide by all their rules and guidelines. LexisNexis will change specifications from time to time, so you need to be aware of those changes and comply immediately. The other caveat is that you will need to be in your new office, with your new internet running to start your application. One section of the LexisNexis application captures your IP address. Not the computer IP, but the main trunk line IP that comes into the building.
So, what is the purpose of Lexis Nexis?
Steps to Opening an Independent Insurance Agency Successfully
Choosing the Right Web Address Establish Your Professional Identity Online with Proper Addresses
agency is a real business and for the insurance companies appointing you who want to confirm that your agency is stable. (It helps getting the insurance companies you want to represent.) When your email matches your domain name, you are presenting yourself as an organized, trusted, professional insurance agency. Think of your email as an online handshake. It’s the first chance you get to show that your business cares about the fine details and can be trusted. When choosing your website domain, there are a few things to keep in mind to maximize your exposure. Keep your domain short; less than 15 characters is ideal. You want to make it easy for your clients to search for you digitally, today’s preferred way to find information about you. Purchasing a domain name is relatively inexpensive. You can buy a small website package designed for insurance agencies which generally comes with a few emails at no additional charge. Long email names are annoying to type out, so try to keep your domain/email short and brandable. Do your research on the website domain you want and make sure you act quickly. If possible, a website ending with a .com is the most preferred way and implies that it has a longer history.
Question. Would you meet with a prospect for the first time in your pajamas? Probably not! It would not make people perceive you as a professional insurance agent. If you have an email that looks unprofessional; for example, JohnSmith1983@gmail.com, you may look a little un-kept. John@JohnSmithAgency.com is a professional business email assuming your website domain is www.JohnSmithAgency.com. Having a professional insurance agency website is very important for your customers to see that your
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Steps to Opening an Independent Insurance Agency Successfully
Get Access to More Markets and Unique Products Retain Your Clients and Better Take Care of Their Needs
to help get you started as either an Independent Insurance Agent or Agency. There are several insurance agent groups in all areas of the country, some who operate locally only, others in a
The reason many insurance agents, including those that are captive to one company, want to be an Independent Insurance Agent is the variety and diversity of accounts they will be able to sell and place with a selection of different companies. Independent agents are not bound by one company with one pricing and one set of underwriting rules. If one company takes a substantial rate increase, then it is possible for another company you represent to have better rates and this will allow you, the agent, an opportunity to save the account. This is the unique opportunity and competitive advantage an Independent Insurance Agent has over working for a captive insurance company. The challenge, as a newly licensed insurance agent with little or no insurance experience, is getting larger and preferred insurance companies to consider your application for appointment. It can be done with a good marketing plan and a willingness to prove your ability to sell policies at the expected level of each insurance company you represent. An agent with experience, either from a captive company or from another independent agency starting their new agency, will likely have a better chance to add more companies. In either case, be ready for each company to ask for a large premium commitment in the first year and beyond. It is not wise to get more preferred insurance company appointments than you are capable of meeting or exceeding the production requirements. As an alternative, insurance companies may suggest that you consider joining an agent group
smaller state territory and those who have a national presence. A group will usually offer you access to more companies for writing business almost as soon as when you join, saving a tremendous amount of start-up
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time. The other benefit is the written premium requirements likely substantially lower than what would be offered to you as a standalone insurance agency. CAUTION: If you choose to consider joining an agent group, be sure to evaluate each one on what benefits are offered to you. Some groups only provide markets with no support, others will tell you that you are an independent agent, but the group retains ownership of the business you write. Some will say that you own your business 100% but will make it very difficult to move the business if you decide to leave the group. Other groups will offer benefits, supplemental compensation, education, and training as part of their membership to help you succeed. Based upon your knowledge level of property/liability insurance, the group that will suit your needs will vary. Take time to evaluate the groups of interest to you. All require a contract to sign. Review the contracts carefully and even have an attorney review multiple contracts to see what best meets your needs.
Steps to Opening an Independent Insurance Agency Successfully
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