Becoming an independent agency certainly comes with benefits — more earning potential, greater variety of products, and overall flexibility. But before you make the move, there is a great deal of work to prepare yourself for the transition to independence. Consider the transition Nationwide made in 2020 to operate as a fully independent agency carrier. FirstChoice, a MarshBerry company, helped 475+ agencies make the switch from the exclusive agency channel to full independency and gained a great deal of expertise from this experience. When an exclusive agency (also known as a captive agency) becomes independent, there are several key steps needed to navigate the process successfully.
- Do some reflection. Are you ready to take on a change of this magnitude? Decide right away what type of clients you’d like to write, what lines of business you will offer, and what geography you will focus on.
- Know your numbers. What will it take to get your operation off the ground? Have a budget that includes all the new costs that your previous captive company covered that you now have to pay for. Being an independent agency is more expensive than being an exclusive agent, but also comes with greater earning potential.
- Upgrade technology. Do you have what it takes to learn new technology? Not just what will be expected of you from your new insurance company relationships but the technology that will be necessary to run an independent agency? This could include Agency Management systems, comparative raters, marketing software, or CRMs. Evaluating all the programs available to you can be overwhelming and time consuming.
- Prepare the staff. Will your staff help you through the transition? Are they willing to learn alongside you? We found many agency owners are thrilled at the prospect of representing more than one carrier after years of captivity, but their staff struggles with the transition. The number one issue faced by agency owners in today’s market is finding new talent. Will you have the staff you need to ramp up and continue to grow?
- Choose the right contracts. Not all carriers are created equal. The right insurance company contracts for your agency should match your plan and be a good fit based on your geography. Insurance companies will have production requirements and it is essential you meet those goals. Build strong relationships with your new partners, they will serve you well in the long term.
- Protect yourself. Make sure you have your internal security locked down. Much of this was probably taken care of by the previous company and is a big risk in today’s world. In addition, it is imperative that you purchase your own errors and omissions (E&O) and cyber insurance to protect your business from lawsuits.
- Build “your” brand and go social. Have a strategy to grow your agency brand through a social media strategy. Maximizing Google presence is critical in growing an independent agency. You will no longer have the name of the exclusive organization to drive business to the agency or to promote name recognition, so it is up to you to build your local brand in the marketplace.
- Focus on talent. Always be looking for new talent and have effective hiring policies in place. The insurance employee population is aging, and thousands will be retiring in the next few years. Do you have an agency where young people would like to work and grow? Are your hiring practices up to date? Do you have defined job descriptions and effective compensation plans?
- Get help. Consider joining an agency network like FirstChoice. Quality networks can help maximize revenue, provide technology solutions, assist with education, strategic planning and producer development. A good network will also help partner you with the right carriers for your agency with less volume commitments than you might need on your own and opportunities to earn a higher revenue return. All networks are not created equal so do your homework. In addition, join your local Independent Insurance Association. They are a tremendous resource for education and agency resources.
The transition process will vary based on the specific circumstances of your agency and the agreements with the captive insurance company. Seeking professional advice, both legal and financial, is crucial to ensuring a smooth and successful transition.
Is FirstChoice, a MarshBerry Company, right for you?
FirstChoice has a proven track record for helping exclusive agents make the transition to independency. We address each of the issues outlined above to dramatically cut the learning curve. We have relationships with technology vendors and a technology consultant to help you decide the best program for you, to assist in setting up internal security, and to assist in marketing technology. Solid educational programs are available to support you from creating your strategic plan and goal setting, to talent acquisition through to succession planning. We meet our agencies where they are from infancy to perpetuation or final sale.
