Building an independent insurance agency can be a rewarding venture, but like all endeavors, it comes with certain challenges that can overwhelm anyone that’s starting from the ground up. You might have many questions regarding which licenses are necessary, where to open your office, and how to find and contract with insurance carriers to represent.The good news is that help is available – and, once your agency is up and running, even though with some hitches along the way, you will also have the opportunity to pursue a long list of rewards, such as the ability to control your business, a nice return on owner’s equity, and being able to open up your product offerings to a wide range of options – which in turn, will place you in a better position to help your clients.
Step 1: Get The Process Started
While there are a number of items that must be taken care of before officially opening your agency, by following a list of the essentials, you can get much of the groundwork laid out so that you can move faster towards opening the door.
Some of the most important items on your list for building an independent insurance agency should include the following:
Develop a Business Plan.
As with any new endeavor, your independent insurance agency should begin with a plan. A business plan provides you with a “blueprint,” which helps you identify your target market, assess potential risks, and outline your cash flow projections.
Obtain Startup Capital.
In many cases, opening independent insurance agencies don’t require large upfront capital. But, you will still need some cash to secure your place of business and to furnish your new office. Take note that as you may not see a steady stream of income, at least in the beginning, you will also need to set aside some funds to pay for your daily living expenses.
Meet Licensing and Legal Criteria.
You may already have an insurance license, but you will still need to make sure you are properly licensed to offer any additional products. Depending on your location and business structure, you may also be required to file additional paperwork with the state.
Hone Your Skills.
You’ve mastered insurance selling. Now you need to brush up on other areas, such as handling admin work and acquire new skills that cover the more technical aspects of the business. As you scale your agency, you may need to take on several hats.
Contract with Insurance Carriers.
Of course, you will need products to sell in your agency. If you were a former captive agent, you are likely used to selling only products by your parent company.
But as an independent insurance agency, you need to be more flexible. To cater to the needs of more customers, you need to carry – and be knowledgeable of – different products from various carriers. But to be able to do so, you need to start contracting with insurance carriers. And before you can be appointed with a carrier, you may also need to have Errors and Omissions (E&O) coverage, check the E&O page to find out if your carrier requires one.
Determine the Insurance Carriers that are a Right Fit.
Choosing insurance companies to represent is a bigger challenge than you think. You want to be able to offer your customers ample choices, which means being faced with a myriad of options.
How do you determine the right carriers?
Before you even handpick insurance carriers to represent, you need to have a convincing record as a reliable agent who can sell and maintain insurance clients. So unless you already have several years of field experience, your best bet is to join a top-level organization that's licensed to sell insurance products from both big and small insurance carriers in most states. From there you can choose a field marketing organization for your agency to partner with.
Working with an insurance field marketing organization (FMO), also called an Independent marketing organization or IMO, lets you easily contract with the right carriers. It will also provide your agents with a channel for submitting contracts online using software (saving you an overhead cost), obtaining continuing education discounts and additional training, and receiving commissions from carriers you’re appointed with.
When you're finally choosing carriers, some things to consider are the following:
- The carrier's reputation among independent agents. (Do independent agents and agencies speak highly of it?)
- The carrier's reputation among target customers. (Is it a recognizable and trusted name?)
- The demand for the carrier's insurance products. (Are they in-demand or attractive to customers?)
- The financial health of the carrier. (Is it in good financial standing and has very little risk of bankruptcy?)
- The administrative and agent support it offers. (Does it provide support, like training, software, marketing money, and lead assistance?)
The carriers that can provide these, and a few more personal requirements, would be good choices for your agents to represent.
Find the Right Business Model
Establishing a business model is the key to accomplishing your goals. You don’t have to be a maverick and adopt (or invent) a new business model. In fact, trying to reinvent the wheel can even take you a couple of steps back, instead of helping you deliver outstanding value. Rather than jumping on whatever is the most recent trend, turn to trusted strategies and sales techniques.
Step 2: Take Inspiration from Franchise Business Models
Some of the most successful systems include franchise business models. A franchise is a system where a parent company (the franchiser) cascades their processes to franchise owners (also called franchisees) and gives them access to an established business network. Franchise owners get to enjoy a certain level of freedom and flexibility over their individual business along with peace of mind, knowing that they are tapping into a sales system that works.At face value, it can be hard to see what insurance sales and franchising operations have in common. But both boil down to the same approach: relying on tried-and-tested techniques to establish and grow a business.
Stick with a Proven and Tested System
According to the 2018 Frequently Asked Questions released by the Small Business Administration (SBA)’s Office of Advocacy, about 80% of small businesses survive the first year. This seems like a promising number, considering the common belief that most small businesses fail within the first five years. But the numbers fall sharply from there. The same report says that of the small businesses that survived their first year, only about half passed the five-year mark.
But McDonald’s, one of the oldest and most successful global franchises, went years before one of its franchises went under, and for good reason.
If you visit any McDonald’s store anywhere, you just know what to expect, from how the restaurant operates down to the food selection and taste. McDonald’s followed along a tried-and-true business model, and to fail, a franchise would have to deviate substantially from the system in place.
The same is true when you adopt a proven system for your insurance agency. You can easily tap into an entire arsenal about insurance selling online, but the only way you can produce at your optimal capacity is to have a step-by-step system that you can use with this information.
Back in 1920, for example, W. Clement Stone founded Combined Insurance Company with only $100. Today, the company’s estimated worth has reached billions.
How was the company able to reach massive growth at a time when many other insurance carriers were struggling at the same time?
It was because its agents had a specific process to follow. Meanwhile, Subway attributes its success to taking techniques that work and applying them across the board – in different franchise locations, in different states and countries.
In the early days of franchising, the most successful franchisees were those that didn’t have any business background. First timers were more likely to understand how to follow a system while MBAs often looked to change or improve the system on their own. Those who followed a foolproof system were able to reach sustainable success, while those who attempted to change the game struggled to remain relevant and realize regular profits.When looking for the common denominator between the insurance and franchising industries, think of this: having a sales system offers the same benefits as tapping into the resources that are readily available in a franchise.
For example: a system lets insurance agents who need access to a sales process or system tap into existing resources. Maximizing readily available expertise and tools instead of spending time looking for and testing different options can give insurance sales agents an advantage over their competition.
Would You Like Fries With That? (Would You Like Additional Coverage With That?)
Systems can be used not just for getting customers in the door, too. Think about the last time – or any time – you’ve visited a McDonald’s restaurant, and it is likely that you were asked if you’d like fries or an apple pie to go with your order.Similarly, insurance professionals can significantly increase their business by simply asking questions of their clients and prospects, and showing them how adding additional coverage can benefit them.
As An Example: Ben Feldman is considered by many in the insurance industry to be the greatest life insurance salesperson of all time. One reason is that Ben closely followed a viable system. But, what Feldman also did was offer “packages” to his clients giving them a solution rather than just policies.
For instance, in asking whether the client wanted their kids to go to college – and if so, he would show them the “education” package – what he was actually doing was providing them with a way to save for the future using life insurance. By using his system to show clients what the products could do for them – both now and in the future – he was able to achieve an impressive closing ratio.
Step 3: Do As Successful Agents Do
Successful agents examine the sales process carefully and learn it by heart. Experts estimate that the average American is exposed to at least 4,000 ads daily. That means that as an agent, you need to be able to quickly and clearly establish why what you’re presenting matters. By understanding the sales process, you get to understand how to effectively address objections and reach the closing process.Another thing successful agents do is knowing how to use solution sales effectively. They show their customers that they are listening to their concern and that they exist to help them solve it. Talking about your client’s specific needs and presenting life insurance as the solution is one strategy that can help improve your closing strategy while making your clients feel as if you have served them effectively.
Step 4: Maximize Repetition
Newer sales approaches are attempting to alter sales behavior and habits that you have already adapted to a long time ago. While change is often uncomfortable, it’s necessary. To succeed with a system, it pays to change your behavior. It also involves repeating methods that work.Repetition can lead to mastery. As with any other goal you’re trying to reach, the more you practice and work for it, the better you become. It’s a good idea to test and practice your new selling techniques in front of family and friends, before using them for your business. Speaking in front of people you know first can help you get comfortable about using a new sales approach. Use these initial conversations as a learning opportunity.
Pro Tip: If you can, record your conversations for training purposes so you can go back and listen to them. Hear where you could change what you say and adjust.
Step 5: Managing Agents, Products, and Your Business's Entire Flow
When running an independent insurance agency, it pays to fortify your team’s ability to execute your plans and meet your objectives. That is why finding and retaining good, quality insurance agents is pivotal to success. To grow your agency, a system for proper management of your downline agents is also essential.
In developing a solid plan for managing agents, let’s start by outlining your roles and responsibilities as the agency owner.
The Many Responsibilities of an Independent Insurance Agency Owner
As the agency owner, you may find yourself needing to fill numerous roles. This is especially true for firms that are relatively small, as the tasks often land on the plates of just a few people.
Apart from taking on various roles and tasks, you are also expected to assist your agents in getting their business up and running. You will also need to provide them with guidance and make sure they have specific goals, as well as a clear path to achieving those goals.
Some of your responsibilities may include the following:
- Making sure your downlines have business plans. These plans should include clear objectives, action steps, and realistic expectations in terms of revenue.
- Providing assistance with setting realistic goals and meeting them.
- Giving agents access to tools that help them measure their results and how far along they are in meeting their objectives.
- Making sure agents have the proper license to represent their products.
- Getting agents contracted with the carriers they look to represent.
- Assisting agents with obtaining E&O (Errors and Omissions) coverage.
- Helping agents keep current on their continuing education (CE) requirements.
- Making sure agents have sufficient knowledge and training on the products in their portfolio.
- Providing tools and resources that simplify and speed up application submission and approval processes for agents.
- Providing a convenient platform where agents’ questions can be addressed right away, so they provide their clients with solutions promptly.
- Tracking and paying sales commissions.
As the successful management of your downlines is reliant on various criteria, it can become a juggling act.
Here are some ways you can stay on track:
- 1Establish a timeline. A timeline can help your agents understand that success doesn’t happen overnight. It may take time, and just how long will be different for every agent. A realistic timeline will keep your downlines from feeling discouraged. It might even keep them motivated to follow the business plan they built.
- 2Be available. Set some time aside for answering questions, assisting with prospecting, and even for simply providing encouragement. Maintain an open communication line and be ready to provide additional resources for issues that can’t be solved in-house.
- 3Find the right partner. A field marketing organization can help insurance agencies and professionals manage their day-to-day operations and achieve success by providing access to online training programs, online contracting platforms, and more.
How to Provide Downline Agent Management Solutions
A good agency management system is a fundamental building block for your independent insurance agency. Here are some ways you can manage your downlines and give them a hand with finding prospects, closing sales, and managing their clients.
Bring in Old Customers.
Let’s go back to franchise business models. Franchise businesses often have a system in place for getting new customers in the door and getting old ones back in.
McDonald’s and other successful franchise businesses will typically also have a system in place for bringing its current and new customers (back) in the door. In retail, this can often be accomplished by offering coupons. Likewise, in insurance, this can be done by offering regular reviews and properly asking for referrals.
According to a recent survey of salespeople, it was found that roughly 78% of these professionals either do not have a system in place or if they do have one, they will oftentimes not use it. This offers a good explanation as to why roughly 20% of salespeople end up generating approximately 80% of the business overall.
Serving Your Existing Clients Blooms New Opportunities.
Plenty of marketing materials out there designed to help insurance agents are geared specifically towards helping them identify new business.
Have you ever heard the concept that you are much better off pursuing repeat business from people you have worked with than investing all of that time and energy in a new client?
While it is certainly important to begin adding new clients to your database and constantly be prospecting for new business, there is a great deal of opportunity in the market of individuals you have already converted. You are surrounded by opportunities to sell individuals life insurance but you may not be aware of it just yet.
Pro Tip: One of the most important ways to become aware of this situation is to identify opportunities and solutions that can help meet the client's needs. Just because you were successful with selling someone a policy years ago does not mean that they are still benefiting from that policy or that their needs haven’t changed significantly.
Touching base again can give them an opportunity to review their existing needs directly with you and to purchase a new type of insurance or to upgrade their existing set of policies.
A Strategy Designed For Each Customer
Whether it’s a more advanced concept or simple answers for their existing life insurance policy, being able to determine a strategy that helps to best convert these individuals should be your primary goal. Finding possibilities with your clients begins with considering all of the different goals that they may have for their life as well as any potential business since you’ve last talked to them. Identifying someone years ago who was in need of a term life insurance, for example, may give you the opportunity to open the door to talk about more advanced strategies.
These could include retirement planning strategies, unique planning strategies for special needs, wealth transfer strategies or retirement planning strategies. When it comes to cross-selling, you need to consider that there are two primary types of consumers. Those individuals who do not already own the product and those who do already own the product.
In this particular article, we are exploring directly how you can increase your sales with those who already own the product.
Whereas with prospects who do not already own life insurance, the key with them is education, identifying a need, product awareness, uncovering the interest and then closing the sale.When it comes to somebody who already owns the product or bought it from you in the past, the key with these individuals is repetition, a good follow-up strategy and selling the benefits of working with you directly. If you did a great job the first time around, it’s much easier to re-open that door.
Targeting Needs are New Conversations.
One of the most important things you need to do is identify target products for every individual customer. It is important to identify the immediate needs of the consumer in front of you first. Planting seeds for the future can certainly be valuable but make sure that your clients know that you can take care of the first product while you’re trying to promote a second one.
Build a Relationship with Consumers.
Staying in touch with consumers is important. Potentially warming them up with a letter first and then making a phone call to follow up can help you reconnect and see what needs they may have. The small talk portion of your conversation can reveal pertinent issues in their life and whether or not their existing life insurance policies are still serving their needs.
Since these individuals are already your clients, they are probably expecting you to review their needs on a regular basis and to provide advice. You can also talk to them about business options, for example, if they have started their own company or changed their own employment situation, that previous group policies are no longer active.
This gives you a window of opportunity to talk about more advanced individual life insurance policies. Another excellent way to stay in touch with your existing customers is what’s known as a birthday campaign.
Term life insurance rates tend to increase with every birthday that passes without coverage. Your goal should be to send a postcard to every client approximately 30 days before their next birthday or before their existing policy expires to let them know about the opportunity to convert an existing policy or to add additional insurance.
Marketing benefits to them and making them aware of deadlines. Telling individuals that they’ll be more likely to get a cheaper price before their next birthday can help put urgency in their decision and increase the chances of closing the prospect more effectively.
Step 6: Prepare For Scaling Your Business
As you scale your business, you may find it difficult to maintain a seamless management solution. This is the reason many owners seek the services of field marketing organizations for insurance independent agencies.
Insurance field marketing organizations (IMO/FMO) can help cut down cost, gives access to software and tools, and can provide guidance for your agency.Get in touch with us today.
Key Takeaways In This Article
- Make sure to develop a plan of attack
- Align yourself with the right partners for you
- Don't reinvent systems, follow ones that already work and implement them in your business
- Watch what other successful agents do in your industry
- Practice and Practice until you become the expert
- Be prepared to have many responsibilities and a way to provide attention to detail to each and every agent and consumer
Over to You
We'd love to hear your thoughts in the comments below on:
- Did you start with capital or on your own?
- If you have an agency, how would you launch it differently than you did?
- Any other techniques or sales that you believe should be in this article?
If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!