The Cheat Sheet on How to Become An Independent Insurance Agent

Do you want to become an independent insurance agent? Or want to start your own independent insurance agency?

Buy an agency, start an independent insurance agency, choose a franchise or get an FMO? Learn how to become an independent insurance agent easily.

f you’re a newbie in the insurance field and want to pursue your career as an insurance agent, you need to have an insurance license.

How to get an insurance license? 

Almost all the states need you to attend and complete a pre-licensing course which are available online. When you have completed this course, sit for the official insurance exam to become an independent agent. After passing your license exam, submit all the necessary documents to your state licensing department. You can now discuss and sell insurance policies. 

For captive agents looking to switch  and go independent, or for professionals looking to start you own agency, this article is going to be a guide for you.

Let us go with it now.

The traditional method to become an independent insurance agent is difficult now

If you’ve done your research, you know how hard it is to become an independent insurance agent. It is very difficult to raise capital for your independent insurance agency. Moreover, you have to deal with carriers, fulfill their quotas, hire servicing teams, pay rent, provide insurance, and take care of all marketing and operational tasks.

While the freedom might seem tempting, if you’ve not thought it through, starting from scratch is difficult. Don’t worry, though. There are a few options that might make it easier for you, the first of which is:

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Buying an existing independent insurance agency 

That’s right. You can buy someone’s Book of Business, which essentially means you’re taking over their agency. This requires some amount of capital, however, since even an average insurance agent’s book is worth at least $2 million. 

You’re also going to have to deal with the operational tasks by yourself, though. The only difference here: someone has already set everything up for you. Running it will still be your task.  

Are their easier option?

It wouldn’t be a cheat sheet if there weren’t. Insurance is a vast industry, and over the years, it has evolved to match changing market scenarios and demands. Become an independent insurance agent through an agency model. Several agency models allow you to run your independent insurance agency with varying levels of support and responsibilities.

The ultimate goal of these kinds of institutions is to facilitate agents so that they can concentrate on what they’re good at, which is selling insurance. They will provide agents will various operational assistance, which might include:

  • Agency setup
  • Servicing support
  • Marketing and lead generation
  • Risk assessment assistance
  • Technological assistance

These “you sell, we service” models are getting more and more popular today. These are the ideal models that allow both agents and facilitators to prosper and grow. Insurance agents do take advantage of insurance clusters. If we take a bird’s-eye view of the market, there are two basic models gaining popularity in the industry.

Franchise

How to start an insurance agency?

These models are structured in such a way that the insurance agent owns an insurance agency as a franchise outlet, and can grow their book of business as they see fit. They will have to pay specific fees and costs, and in return, they will be provided with servicing and marketing & operational assistance.

An additional benefit of starting an insurance agency through a franchise model is that the agents will be associated with an established and trusted brand so that trust-building will sail smoothly.

However, there are certain drawbacks to considering starting an insurance agency through a franchise. The franchise fees and other periodical payments are significant. These models also usually have a non-compete clause in the contract that might not allow you to progress at the rate you desire.

What do the agents say?

“There is no doubt that I am provided with a level of support simply not possible if I had to set everything up by myself,” said an insurance agent on the condition of anonymity. “However, the fees are hefty, and there are certain ‘on-demand’ payments stated on the contracts that do not have a cap. It makes me a little wary.”

This agent is associated with Brightway Insurance, one of the two big insurance franchises in the United States. Combined with Goosehead, these franchisors have over 1000 offices operating across the country.

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What it gives

After reviewing the Franchise Disclosure Document (FDD) for both these companies, it’s clear that they provide you with branding, operational processes, marketing & servicing support, and technical assistance.

What it takes

The same FDD also revealed a hefty starting fee, with just the initial franchising fee over $50K. In addition to this, there are also various uncapped “on-demand” costs under different headings too.

These contracts also contain a 2-year non-compete clause that might paralyze you professionally if you decide not to continue with them.

Also, while going under the umbrella of an established brand seems reassuring, remember that your agency might be perceived negatively due to less-than-flattering endorsements of other franchise outlets

Ultimately, starting a franchise outlet is a lot easier than starting an independent agency on your own, but there are certain downsides, as well.

Insurance FMO model  

Starting an independent insurance agency through an FMO model in another way. This model offers a lot more freedom than a franchise-based model is the Insurance FMO (Field Marketing Organization). An FMO provides varying levels of assistance to insurance agents or agencies.

Establishing an independent insurance agency through FMOs also charge a lot less than the franchisors. They usually offer the agents a split in the commission they earn doing business. An FMO will not provide branding assistance for aspiring independent agents. Instead, they act as facilitators in setting up a brand.

The commission split varies from FMO to FMO, but it averages at around 70/30. We spoke to an agent associated with Newfront Insurance, which is a rapidly growing FMO on the west coast. They revealed that the split for Newfront was 60/40 in the first year, and 40/60 on renewals.

Are there better FMOs?

We also took a look at Covered by Sage, another FMO that has recently started up on the other side of the country. Based out of Tucker, Georgia, they brand themselves as an insurance agency, but function on the FMO model. They are a great option if you want to become an independent insurance agent.

Their commission split is the best in the market, with 80/20 for the first year and 50/50 for renewals. They also offer, on paper, the best value propositions for any FMOs across the nation. However, the organization is less than a year old, and although they have ample backing and capital, they have not yet proved themselves in the market.

Covered By Sage provides an excellent opportunity for agents on the east coast. Although they are new, their vision of “leading the transformation of the industry with agents front and center” certainly feels exciting. They also offer full servicing assistance, marketing & lead generation support, and currently the best-in-market splits.

If they can deliver what they promise, any agent looking to go independent on the east coast should get in touch with them. 

What it gives 

  • FMOs allow a level of freedom and independence that franchisors cannot. They allow agents to conduct their own business and build their book.
  • FMOs ensure you receive up-to-date information. They usually keep agents informed through the use of their website, emails, calls, and so on. Most FMOs also use insurance agency management systems to be more efficient.
  • FMOs make sure agents know how to get certified and when to renew their certifications.
  • FMOs offer marketing and lead generation services for agents. As a result, independent insurance agents can retain their existing customers and focus on selling more policies.
  • Ultimately, an FMO will usually provide the same level of assistance to agents as franchisors.

What it takes

Surprisingly little. FMOs have agent prosperity as their principal focus, not growing their brand. The more profitable the agents are, the more profitable they become. They encourage growth and ensure that any hurdles encountered are resolved smoothly.

While established FMOs do take a more significant chunk of your commission, the newer ones are offering agents better terms, better splits, and better prospects.

All in all, opting to build an independent insurance agency on the FMO model is the easiest and best option for insurance agents, at least until the next industry innovation.

Think we’ve missed anything out? Let us know in the comments below.

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Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!

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