Starting an Independent Insurance Agency: Short How-To Guide

Starting an independent insurance agency is an exciting career option. It provides you with the opportunity to become a business owner in the insurance industry with unlimited earning potential. Yet, it's understandable that you may have some concerns about sole proprietorship or about starting an independent insurance agency.

This post will give you four key tips for starting a business as an independent insurance agency owner. You'll learn whether it is a good time to start an independent insurance agency, what it takes to start an insurance business, the licensing requirements for independent agents, and what it takes to sell insurance products for insurance carriers.

Is This a Good Time to Start an Independent Insurance Agency? 

The insurance business is exciting for the right person interested in a sole proprietorship. Yes, despite a pandemic, it is a good time to start an independent insurance agency! According to the US Bureau of Labor Statistics, this profession will grow by 10.8%. They consider this faster than average! You should not consider this growth as saturation or over-saturation because the US Bureau of Labor Statistics does not differentiate between the type of insurance agents starting a business. Independent agents work with multiple insurance companies, while a captive agent works with one insurance business. However, they are both considered business owners and sell insurance products while maintaining their book of business.

Additionally, polls show that more than 40% of Americans don't have life insurance, so there is plenty of opportunity still for insurance sales, For example, it is the law to carry car insurance. If you buy a home, most mortgage companies require homeowners' insurance. In many professions, professional liability insurance is a must. So, yes, the insurance business is alive and well! In fact, according to ZipRecruiter, the average national salary for an independent insurance agent is around $91,000 per year. Keep in mind that's only the average cash flow - independent agency owners could make over $150,000 over time as their agency grows. 

Starting an Independent Insurance Agency: What Does It Take?

Although meeting the licensing requirements is an essential step, we will discuss that separately. In this section, we will discuss what you need to start your insurance business.

1.     Decide if you're able to tolerate the risks associated with starting an insurance business. Being a business owner of any kind is not for everyone. Independent insurance agency ownership is no exception.
   
   
2.     Know your start-up costs in advance. Do you plan to use physical office space? Will you be virtual? What will the cost be for an agency management system? What about the cost for your errors and omissions insurance? E&O insurance is generally part of state requirements for all insurance companies operating. Think about everything you need to begin operating as a business owner: furniture, signs, advertising expenses for a year, etc.  
   
   
3.     Write your business plan. A business plan can be very beneficial. It helps you determine your marketing plan, narrow down your target audience, and develop an overall game plan for your insurance business. If you plan to seek a business loan or investors, they will want to see your business plan.
   
   
4.     Get a book of business. A book of business is a book of clients. As an independent agent, you can find another agent looking to sell their book of business. Obtaining a book of business from another agent is generally much faster and easier for a new insurance business than building a new book of business. Of course, you want to keep adding to your book of business. Once you purchase the book of business, it is your job to service the insurance products and clients. These clients also become your leads when it comes to selling more insurance products in the future.
   
   
5.     Choose the right agency management software. We mentioned this earlier. This type of software helps you manage the duties associated with your independent insurance agency. It helps you stay compliant with state regulations, maintain and manage your leads, help with workflow, and more.
   
   
6.     Get the right insurance in place. If you're the only person working for your office, you'll need a business owner policy and E&O insurance. If you hire an assistant or anyone else, you'll need worker's compensation. You also need a surety bond because you're working with insurance carriers.
   
   

SIAA provides coaching and mentoring support for independent agents and independent agency owners. It's just one of the many ways we support our members.

Licensing Requirements for Independent Agents

You must meet the state licensing requirements as an independent insurance agent and as an agency. Each state sets its own requirement for the number of hours you must fulfill before taking the exam to receive your insurance license. It may be between 20 and 40 hours, with up to 12 hours of those hours in ethics courses. Many states offering both life & health and property & casualty must take 24 total hours, with half of the hours in life & health and half of the hours in property & casualty. They must also take two hours of ethics classes.

If you plan to offer accident insurance, disability insurance, or inland marine insurance, those are generally separate licenses that you must study for and pass a separate licensing exam. In certain instances, you may be able to retake a failed section of an exam without paying again, but you must check with the Licensing Insurance Division in your state or the state that will oversee your license.

If you plan on offering insurance products in multiple states, you need to check the state requirements for each to determine if they offer reciprocity or if you must fulfill specific requirements.

If you plan to be the main producer and not hire other agents, your individual license should be enough. If you ever hire another agent or incorporate, you will need to get an agency license according to state requirements. Generally, if you're only hiring support staff, you do not need an agency license. You should research the requirements in your state.

Selling for Insurance Carriers: What Does It Take?

Once you pass your insurance licensing exams and you're ready to hang your shingle, what does it take to sell insurance products for insurance carriers? After all, selling multiple insurance products from multiple carriers is what sets an independent insurance agent apart from a captive insurance agent. The answer is: it depends on the requirements of the insurance company. 

You must meet the requirements they set to represent them. And they do want independent agents to represent them because it means they reach more of the market, however, they want you to show them a book of business and the potential for growth.

Get Support Starting an Independent Insurance Agency 

You don't have to walk the road alone while starting an independent insurance agency. SIAA is more than an insurance aggregator. We are a team of independent insurance agent members and independent insurance agencies with immense resources, including coaching and mentoring (and profit-sharing opportunities). We are an alliance, and we're here to help. Learn more about SIAA and what we offer today!