How to Become an Independent
Insurance Agent: A Cheat Sheet

Any experienced baker will tell you that baking is not as easy as the recipe makes it out to be. A new baker will need to observe their seniors, take notes, and practice hard. If you want to run a new independent insurance agency, you are much like the new baker; you need to take notes.    

However, there are a few shortcuts you can take to building a great insurance agency. Your hard work and resilience will hardly come second to these shortcuts but will help you in the long run.

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What’s in store for an independent insurance agent?

As an insurance agent, you will be playing a crucial role when it comes to buying insurance. Customers usually have little to no idea of what insurance they should purchase, and look for expert advice. According to the 2020 Small Business Risk Report released by the Hanover Insurance Group, 72% of small business owners believed that advice from an agent is vital to their insurance decisions.    

Agent advice becomes even more important to clients when it is coming from an independent agent who offers more choices. Independent insurance agents sell one or more types of insurance, such as life, health, and property & casualty. Unlike captive agents, independent agents are not locked into specific products or carriers, which grants them flexibility.

The pay isn’t bad either. According to the Bureau of Labor Statistics, in May 2019 the median annual wage for an insurance agent in the U.S. was $50,940. The highest ten percent of agents earned over $125,000. The commission allows successful agents to achieve high earnings. The commission they earn from renewed policies allows them to make passive income. However, before those agents started making money on renewals, they have to build up their agency.

How to become an independent insurance agent

How do you start an independent insurance agency?

To start an independent insurance agency, traditionally it takes a lot of money, time and energy. It may seem easy to start from scratch, but a lot of effort that goes into creating an agency.  

However, it wouldn’t be a cheat sheet if we didn’t have a shortcut around it, would it? You have two options:

Buy a book of business 

You can buy a book of business from an already existing insurance agency. However, it could cost you $250,000 to $500,000, or even more depending on how profitable it is. Even though your agency will be handed to you, you probably don’t want to part with too much money.

Become an independent agent through an agency model

Agency models are crafted to aide your independent agency with appropriate support and responsibilities. You will be able to concentrate on selling insurance while the agency provides all the operational assistance that your agency needs.

Insurance Agency Models

There are two options for these agency models that you can choose from:

1. Franchise Model

2. Insurance FMO Model

Going independent has never been easier

Learn how you can ease your work and start selling more from day one

Franchise Model

A franchise will allow you to own an insurance agency, and how much you grow your book is entirely up to you. They will provide you with all the operational assistance that you need. Although there will be a large number of fees owed to the franchisor, your agency will be associated with an established brand that adds to your company’s goodwill.    

You may find that this agency model doesn’t give the independent insurance agents enough room to grow due to the non-compete clause that they include in their contract.     

For example, Brightway Insurance is one of the better-performing companies that operates on a franchise model to independent insurance agents.  

For a staggering initial fee of $50,000, Brightway offers trustworthy branding, operational aid, lead generation services, and technical assistance. While it may sound like a good investment initially, you should know that a 2-year non-compete clause may bring your agency to an abrupt end should you decide to stop working with them.   

How to start an insurance agency

Insurance FMO Model

If starting your independent insurance agency through a franchise is not your cup of tea, then you can consider working under an FMO model. This model is rising in popularity because it gives the agents much of the same services that the franchise model provides for. In most cases, they split the commission with their agents. On average, the commission split is 70/30 between the FMO and the agent.        

Let’s look into Covered by SAGE, a start-up insurance agency based out of Georgia that functions on the FMO model. Their commission split is comparatively the best in the industry, with 80/20 for the first year and 50/50 for renewals.   

The company is a little over a year old with ample backing and capital, and they are looking to prove themselves.    

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 in addition to the high commission splits.   

It is quite easy to see why more independent insurance agents turn to FMO insurance models for their businesses recently. The FMO models provide their agents with the same advantages as the franchisors with a higher level of freedom.   

The prime focus of these FMOs is to make way for agent prosperity. A newer FMO may readily offer its agents better splits than established ones, but both encourage growth and smooth sailing.       

Key Takeaway

It may be overwhelming as a prospective agency owner to find so many choices at your disposal. It is essential to choose the right option for your agency according to your goals and mission. Still, it is also necessary to understand which one of these models will encourage the growth of your company and its values.   

Your independent insurance agency needs a nourishing environment to grow into its full potential. A thorough review of the agency models reveals that the FMO model could be your best chance of dominating the insurance industry. 

Let us know if this article helped you by leaving your comments down below. 

Going independent has never been easier

Learn how you can ease your work and start selling more from day one

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