How to start an insurance brokerage firm
Since most insurance representatives are commission-only salesmen, starting an insurance brokerage firm isn't a dramatic change for them. The biggest difference is that they now pay all the bills for the phone, rent and expenses. The bonus is that they can have people who write and they get a piece of their commission. Normally brokerage firms get a higher commission for selling the same product than their counterparts who are captive agents for the same company and they own the renewals.
Get some experience in the industry. Most people don't start their own brokerage firms their first year in the business. They use the expertise and training of a company agency for several years while they get important designations like CLU or CHFC. The training for the programs helps you in your sales efforts but also gives you credibility when you start on your own. Track your expenses and evaluate the start-up capital necessary for your business.
Find the companies you want to sell. Once you've made the decision to open your brokerage firm, you need products. If you came from a captive agent company, they often have the same products you already know for brokers, but they have a higher commission. Select products by their merit, no matter how good the commission looks. Starting your own brokerage is a lifelong commitment and selecting good products means never having to say "I'm sorry" to your clients. Get E&O (errors and omissions) insurance.
Compare the general agent package for the companies you select. Often they'll offer incentives for you to do a specific amount of business. Sometimes they also help defray the start-up costs. The companies require that you fill out an application to write for them and have a copy of your insurance license. Check all the contractual arrangements before you accept any financial help.
Find an office where you'll locate the brokerage firm. You'll need to have a reception area, closing room and separate office. When you use independent agents to write business for you, they have the option of closing it in the office. You'll need a computer but two computers are better. One should be in your office and one at the reception area desk. You'll also need to install computer and telephone lines.
Attend the meeting for the companies that you broker. Sometimes they simply send materials to introduce you to their products or have their representative that works with brokers stop and inform you of all the product changes, marketing ideas and subtleties. Select the marketing material carefully. You'll find that you'll run out of space if you get too many of everything. Get just a few copies and see what sells. They'll overnight more material if it's necessary.
Hire someone to answer the phones, input new business, schedule your appointments and greet the clients as they come in. This person is your right hand and if he does his job properly, you'll find that yours is much easier. Some states require a license for anyone that answers any type of insurance question. Find out the laws in your state. If you start very small with limited capital, see if you can find an agent willing to man the office with you in lieu of paying rent.
Advertise that you're on your own. You probably can't contact your old clients due to a no-compete contract, but that shouldn't stop you from getting the word out through an ad or story in the newspaper. An open house with coverage lets the clients know where you're at without your calling them. You also may be able to get a few agents to contract under you through the active advertisement.
- Start-up cost
- Contracts with insurance companies
- Phone and Internet lines
- Xerox machine
- File cabinets
- Office furniture
- Information and brochures
- Receptionist or secretary