Becoming an Independent Insurance Broker: Top Tips

Becoming an independent insurance broker is an exciting career opportunity! In addition to being a business owner and providing your clients with more types of insurance products to choose from, an independent insurance agency can also provide you with financial security.

If you’re thinking about becoming an independent insurance broker, we’ve put together our top tips to help you learn more.

Our top tips include:

• Making sure you understand the steps in becoming an independent insurance broker;
• Knowing the difference between a captive agent and an independent agent;
• Understanding how you’ll make money in insurance sales;
• The characteristics of a successful insurance broker;
•  Making the switch from captive agent to independent insurance broker; and
• Resources for independent insurance brokers.

Let’s get started!

Understand the Steps in Becoming an Independent Insurance Broker

When you’re curious about becoming an insurance broker and are not already involved in insurance sales, it’s essential to understand the steps you would need to take to become an independent insurance broker.

Let’s look at what an insurance broker does. An insurance broker sells insurance products from several insurance companies.

Now that you understand what a broker does as part of the insurance industry, let’s look at the steps involved in becoming one.

The process of becoming a broker includes:

• Determining the types of insurance products you want to sell
• Researching what the states require for licensing where you plan to sell if you plan to sell in more than one state; each state has their own licensing requirements
• Studying for and pass the licensure exam for the insurance products you want to sell
• Preparing to invest the financial resources required to start your insurance agency
• Potentially recruiting independent insurance agents to join your agency
• Creating your business and management plan to help solidify they long term success of your agency
• Researching which errors and omissions insurance policies are best for your new insurance agency
• Figuring out which insurance companies you want to be appointed to so that you can sell their products

Know the Difference Between a Captive Agent and Independent Agent

Insurance carriers work with two types of agents in the insurance industry: captive agents and independent agents. A captive agent has a parent insurance company. A captive agent can sell only insurance products from their parent company. If their clients or prospective clients don’t like the premiums offered, a captive agent cannot shop around with other insurance carriers. The client or prospective client must either accept what is offered or go to another insurance agency.

An independent agent is an insurance broker. They sell insurance from multiple insurance carriers. They can sell all types of insurance, depending on the licenses they hold. They could sell health insurance, life insurance, auto insurance, home insurance, or a combination of these products from different insurance carriers. If their clients or prospective clients aren’t happy with a premium, an independent insurance agent can shop around within the insurance industry to find an insurance product that hopefully meets their needs.

Insurance Sales: Understand How You’ll Make Money

In insurance sales, you make money when you sell insurance policies. In the end, the commission structure and profit margin depend on the agreement between you and the insurance carriers you represent. This agreement explains the percentage that you are paid as a commission on each new policy that you write when it is written.

After a policy is written, you are generally paid the following year for the policy as well. However, the amount you make on each policy is set by the insurance carrier.

Characteristics of a Successful Independent Insurance Broker

While the definition of success is mainly based on what any person wants to do in life, a successful independent insurance broker is, in short, someone who manages to have a profitable insurance agency. We can all agree on that. 

To stay profitable, there are specific characteristics of a successful independent insurance broker:

• Be client-oriented. The best way to sell insurance is to focus on the needs of your client. Remember that as an insurance broker, you have the power to shop around for insurance products and find them better rates if they need them. You save your clients time and money. Your focus should always be on what best serves the client and their needs.
• Keep up with your continuing education courses. Continuing education courses meet the licensing requirements in your state, but they also help you learn more about insurance products, marketing, and running a successful insurance agency. 
• Research joining an independent insurance agents network. Independent insurance agent networks provide a large network, profit sharing and access to other resources that can help lead to your overall success. 

Utilize social media and other marketing strategies. You can and should use social media and other forms of free and inexpensive marketing (and other types as your financial resources allow) to bring in new business.

From Captive Agent to Independent Insurance Broker

If you’re a captive agent and you’re thinking about becoming an independent insurance broker, there are some things you should know.

1. As a captive agent, you receive more support from your parent insurance company, but you don’t have the same decision-making power as an independent broker. When you make the switch, you won’t have the same support since you won’t be beholden to one insurance company, but you will have more decision-making power!.
2.  You may need to pass an additional licensure exam, depending on your state.
3.  If you plan to add other types of insurance to your agency, there are extra licensure exams that you must take and pass.
4. You must meet requirements set by individual insurance carriers to become appointed so that you can sell their insurance products to your clients.

Resources for Independent Insurance Brokers

Although independent insurance brokers don’t have the same support as a captive agent, they don’t have to walk the road alone. SIAA provides a network of insurance brokers and resources to help brokers just like you become successful and profitable. From mentoring to continuing education opportunities to profit-sharing, SIAA helps provide growth and access to insurance carriers. Learn more about how we can help you with your career now!