How to Start an Insurance Agency 2023

Hey there Jeremy Goodrich here the owner of shine insurance agency and we're going to talk today about how to start an insurance agency I started my agency from scratch in 2013 with my wife and partner Mackenzie we've been doing it for 10 years we've grown our agency to over a million dollars in Revenue about 5.5 million dollars in Gross written premium so we have a nice solid insurance agency that we grew from 

 Scratch we did not take on any debt at any point in the process of building our agency our approach was to build it slowly and steadily forward without taking any big risks so I want to talk to you about your options and how you would do such a thing yourself so what we're going to cover is captive versus independent that's the first big decision you need to make what's the cost like what's it going to cost me to get started 

 Companies a very key piece that's the product right and then finally your business plan so let's dig in the first decision you have to make is do you want to go captive or do you want to go independent so this is your product right what you're selling anytime you start a business you have to have a product and in most Industries you would create suntan lotion or you would build cars or you would make toys or you would sell food there's active 

 Things that are the products that you sell and of course in the insurance industry that is the same it's a little harder to see because what you're selling is essentially a promise an insurance company is saying hey if something bad happens to you a homeowner or business owner or car owner we will help to pay for the cost of that bad thing that happened assuming it's set up covered in our policy right so that is your product there's two ways to go 

 About this the first is called captive Insurance these are the folks that have the big Super Bowl commercial State Farm Allstate all these different companies they are one company they only have they they have sales people all over the country and so if you go to a State Farm agent that State Farm agents works for State Farm they only have that one company right so that is option number one is become essentially an agent for a 

 Big company a Super Bowl commercial company and work for that company that's option number one option number two is to go independent like shine insurance this is truly starting your own business don't let the captive companies fool you and say hey you're going to be your own business owner well that's kind of true because they make you be uh independent contractors which is really just a way to work around paying taxes and paying benefits and things of that nature with 

 An independent approach you are starting your own business then bringing a list of companies into the fold and making them compete against each other inside of your business so at shine insurance I don't work for insurance companies I can have I had a conversation a few days ago with a company saying hey you know what you all aren't performing you're out of our agency we're not going to work with you anymore and so we are creating a competition inside of our agency of a 

 Bunch of different insurance companies of course we have a relationship with those companies we want to do well with those companies you know we we want to have success because we want them to be happy with us and we want to be happy with them but they don't work for us we don't work for them we can let them go whenever we want and that's the benefit of being in independent so what are some of the pros of being captives well it was simple 

 Right if you get hired by State Farm or whomever you it's simple it's straightforward it's just one company you just have to learn one system they usually pay you something you know there's less to learn right and I think their salary and benefits Associated that with that so not not only is there less to learn but there's a safety net oftentimes they'll say look we'll give you a thirty thousand dollar a year salary plus we'll give you Commission on 

 Whatever business you write and so that can be a lot safer it can be a lot less work it can be a lot easier to be a captive so that's the option uh and that's one of the pros of the captive again on the the captive cons well you know I've already said them I guess you know that there's only one company so you never know if you're truly the best option you you have limited growth you really can't uh scale in the way you can on the independent 

 Side and really make big money if you want to make big money you can make decent money on the captive side but you're not going to be able to blow up like you can on the independent side and then you never know if you're actually the best option right so you're offering One Insurance company's price and coverage and you have no idea what other companies are out there what their price and coverage looks like there's nothing to compare what option you have to other 

 People's and that can be a con also you're Expendable if someone wants to let you go they just let you go you put all your eggs in one basket in some ways and again there's some Safety and Security to that but if they let you go they say goodbye then you're stuck back at zero because you are expendable so what are the pros of going independent well a lot of the options unlimited options I can have as many many companies in my portfolio as I want and 

 Then when I have someone come in and want insurance I can make them battle to get the business there so unlimited option you can ensure almost anything with a captive they generally can't insure big like my Niche is apartment complexes and large commercial real estate State Farm can't generally do that Allstate can't generally do that a lot of you know Farmers American family they can't generally insure that kind of thing so one of the nice things about 

 Being independent is you can ensure almost anything um you truly own your own business to me this is the most valuable thing I own my book of business if I want to sell it to someone else I can one of the things that's my one of the most valuable assets I have is my insurance agency and um I own that no one can take it away from me no one can take away my clients from me I am the owner of that so what are the cons well the first con is it is 

 A lot more work now I've been saying this whole time there's all these different companies right the the work associated with one company is probably similar to what it takes to be a captive but I've got seven or eight that are competing at the same time for one thing one person's business that can take a lot more work to make it happen and make sure that we get the best option for people so one of the the cons is definitely it's more work there's no 

 Doubt there's less predictable income right if we don't have the foundation of a salary if we start our own independent agency we are essentially commission only right it's if we either bring Commission in or we die that's the bottom line and that's how independent is built so you've got to understand that from the beginning now there is one different way to do independent and that is an independent franchise and one of the most common 

 Ones is goosehead goosehead is a really it's a glorified agent that seems like an agency owner so goosehead is an independent insurance agency based on the west coast and they have agents but they've figured out how to articulate it that they're franchising agencies so when someone becomes a goosehead agent which might be a great option for you um they are essentially franchising the goosehead name so you pay twenty or thirty thousand dollars in and then they 

 Give you access to all their companies access to their name essentially you are becoming an agent for that very large agency but it's a nice hybrid between captive and truly going independent so it might be an option that makes sense for you so what are the costs going into it to start an agency well if you're starting in captive it's fairly limited right you're basically going to have to you're going to go to the company and if the 

 Company hires you oftentimes they give you stipends right from the start to go out there and find a building and and set up rent and and do all those things so it can be very limited on the front end when you want to start with a captive when you want to go independent well you could franchise like I said with someone like goosehead that would be about twenty or thirty thousand dollars so that's a pretty limited expense to get in there and have access 

 To all the companies and be able to hit the ground running right from the start but you could pretty much do the same thing and go It Alone on the independent side in fact I would say you don't even have to inve invest twenty thousand dollars I don't know that we really invested twenty thousand dollars at the beginning of shine I mean we basically set up rent at the place we went to and started going so you know we probably invested two or three thousand dollars 

 To start maybe maybe five six if you count the website and all that kind of stuff and then we built from there right we were able to start really simple no big overhead right from the beginning but like I'll talk about in a second you really have to find your companies and that's important so let's dig into that what does it look like to get your product again again right if you're an agent of any kind you aren't the product you're the service you're helping people 

 Connect with the a product but you have to have the product and that is the companies and so well captive is obvious if you get hired by State Farm you work for State Farm you have access to State Farm insurance company and therefore you have your company so captive is really straightforward with independent it's a little bit harder and this is one of the hardest parts of starting an independent agency is figuring out how to get access to the companies so one you could do the 

 Franchise thing goosehead being the most common example you could pay The Upfront cost of becoming a franchisee of someone like goosehead and one of the pros is that you get access to all of their companies now their companies are very standard sort of national companies they don't really have the best companies out there but they have a fair slate of companies and so you could potentially get connected with those another way to do it is something called an aggregator 

 An aggregator is someone who says look I will help you get access to companies but I'm going to take a cut of the commission every single time you sell a policy and so there's some great aggregators out there we use aggregators for some of our so we're a hybrid when we first started shine insurance we had direct contracts with some great companies and that's the first thing we went out and do West Bend Mutual Insurance was our 

 First company great company they've taken care of us uh for all 10 years we've been in business and I love them a lot but they were the first company and we got direct directly appointed with them so we could hit the ground running at some point we decided we wanted to add an aggregator into the mix because along with giving that aggregator a little bit of your commission it also takes some of the pressure off from the insurance companies if you have a direct 

 Appointment with insurance companies they usually want a certain level of business they say you know we you have to write two hundred thousand dollars of business with us or whatever the number is right so there's pressure with an aggregator there's a little bit less pressure you still have to perform they still want to know that you're going to be a good agency to work with but there is a little bit less pressure 

 So aggregators is another solution and then the last one is simply go get those Aid companies yourself there's nothing better than a direct appointment with a great company getting all the commission yourself and being able to write business directly with them the problem is when you're first starting most companies won't appoint you they don't know anything about you they don't know if you're good at what you're doing they don't know if you're going to write 

 Quality business or not and so you have a hard time getting appointed but those are the way to find your companies so the last piece of this video is really about your business plan because no matter how you go about it you've got to create a business plan a clear system a clear strategy a Clear Vision what is it going to look like five years from now ten years from now and then work backwards let's talk about what parts of your business plan you need 

 I guess we just start with whatever you do you have to be able to sell your plan when you go to a when you go to a captive company when you go to an aggregator when you go to a specific Company If you're trying to just get directly appointed they're going to say to you what is your business plan how do you plan to attract business attract quality business attract people who truly care about their insurance and are going to take care of themselves and 

 Hopefully not have as many claims what is your plan you've got to start from there and what differentiates you these companies these aggregators they've all heard from hundreds of people who all say that they're going to be great at selling insurance but you have to separate yourself you have to tell them specifically who you are and what you do what makes your agency interesting you've got to figure that out from the very beginning so 

 Let's talk about that we've got to figure out how we can attract clients we can attract companies and ultimately we can attract team members at first you're not going to necessarily need team members you can do this by yourself for a couple of years before you need anybody else but these are the three things you have to attract in your business plan right how are you going to attract clients how are you going to track companies and how are you going to 

 Attract team members well we've got to start you know there's three parts of every good business marketing sales and delivery we've got to have all of those things down from the beginning so let's start with marketing are you going to Niche or are you going to be a generalist in other words are you going to write any kind of insurance you can anything home Auto Life Health business all kinds of businesses every business 

 On the street whatever it is I'll write it that is one kind of insurance agent another kind of insurance agent is one who says I focus on a specific group of people at shine insurance we have two niches one is local Personal Insurance in Bloomington Indiana we are focused on this area and this area only on our personal insurance now we will do home and auto insurance across the state of Indiana but we're really focused on Bloomington Indiana as our Niche on the 

 Business insurance side we go much bigger but still very focused the number one Niche we have right now is commercial real estate we have a National Commercial Real Estate program for apartments office bill building's retail industrial and Self Storage so that is very specific right we're not saying restaurants we're not saying um you know jumping gyms or whatever we are saying commercial real estate and that's what we're focusing on and as we 

 Add more niches we we can add more niches that's fine we can do Tech we could do restaurant we could do Brewery there's you know we could do lots of different things um but that's another Niche with another person in it right that's the growth pattern that you use if you are Niche based so am I a generalist am I a niche based I would say if you're going to be generalist be all in on the town you live in 

 If you're going to be a generalist then you're actually a niche specialist in the town you live in you love that town you know that town you donate to a non-profit organizations in that town you're on boards in that town you love the sports teams in that town you're really really focused on the town you're in that makes being a generalist in your town and actually a niche right you're niching down on your town itself if you're gonna Niche do something that you 

 Have knowledge about where have you been before what have you done before maybe in a past job a past life maybe you really love this Niche for some reason have passion behind it it's going to help you sell that is your approach to marketing going to be inbound or outbound super important outbound marketing is what you've heard of before this means you're constantly going out and cold reaching out to people and trying to get them to buy 

 Your product this could be cold calling phone lists this could be blanket Direct Mail campaigns this could be email campaigns anything that is hey I want to sell you something will you buy it whether that's a TV commercial or a mailing campaign that is outbound marketing and it's one style of marketing the style of marketing we use at shine insurance is primarily inbound marketing what we do is we use thought leadership 

 We use giving people value to have them in turn look at us when they're considering insurance so my podcast going to conferences helping with YouTube videos like this one I'm out there simply giving value and putting myself in the position of thought leader in the insurance world for a specific niche in my case it's commercial real estate for the most part right so I'm going out to Commercial Real Estate Investors teaching them 

 About commercial real estate teaching them about risk connecting them with each other all of these things have nothing to do with insurance necessarily right but I'm putting my name out there and bringing them my direction and so when they do decide to consider insurance they come my way naturally and that's called inbound marketing when someone a client out there comes to you when they need something instead of you going to them so you really have to 

 Decide what are you going to do are you going to blanket the world with outbound marketing phone calls and things like that that's one way to do it the downside is that your close ratio is much lower Maybe three to three percent of people that you talk to are actually going to buy insurance from you inbound is the opposite you're going to have a very high close ratio because someone has come to you there's going to be much fewer people though right fewer people 

 That you engage and talk to so that's the the inbound or outbound strategy that you have to think of when it comes to sales for me this is the moment someone is talking to you about potentially buying something from you right in an inbound strategy they come to you and get in get on a fit call or whatever how are you gonna you know use what strategy are gonna you're gonna use in that sales process are you going to be kind of pressurey are you going to 

 Create scarcity you're going to make a feeling like they don't make a decision right now whatever it is you're offering is going to be lost in some way you know that's one approach there's sales the approaches and things like that or you could be really relaxed when I first started with shine it was like Hey if you like what you see great if you don't no problem you know that's a very relaxed approach I'm just offering something and saying hey if you like it 

 Great if not no problem for me I now have moved into a little bit more of a mix if I've gone to the trouble of creating a proposal for you and doing all the work that we do to create just an awesome delivery of information in that scenario then I'm not not just gonna say hey if you don't want it no problem I mean if they truly don't want it and say they don't want it yeah no problem for sure but I'm going to make sure I engage 

 With them check in with them even if they say it's not the right time I'm gonna you know follow up with them I have all these systems to make sure that I'm engaged making someone say no to me if we've gone to that point and I think that's a hybrid between pressure and relax finally you have to have delivery what you'll find as you grow your agency is the number one source of business is referrals that could be external referrals from folks like lenders 

 Realtors and financial advisors but your client referrals are going to be the best opportunities every time someone calls shine and says hey I'd like to talk to you about some home and auto insurance I heard about you from and they name a client that we already have the opportunity to close that deal is incredibly High we close those deals at 80 or 90 percent right only one out of ten person who comes to us from a client referral doesn't end up going with us 

 For insurance that is incredibly high and that's the value of client referrals those come from our delivery system because every single single time someone engages with us they get a happy individual who is knowledgeable about what they're talking about who is kind and clear and makes Insurance simple right that's what it's all about and that's what we're doing here so you have to have that piece as well all right that is really the breakdown 

 Of how to create an insurance agency but I know you have a ton of questions you have to have other questions that you're thinking about as you consider creating an agency I want you to go to the comments right now and and send those questions to us let us answer some questions for you and help you start your insurance journey I think that insurance is just one of the neatest things it's it's similar to real estate in that you don't have to have a college 

 Degree to get started you don't even have to have a high school degree to get started all you have to have is passion and the willingness to be able to teach people about something that they don't really want to pay pay attention to because it's about protecting them when bad things happen and of course we don't want to think about when bad thing things happen but we do want to protect ourselves from it so I'm really excited for you I hope this video video was 

 Helpful I hope you go down in the comments and leave a comment about what I left out what I didn't add what you'd like to know more about and if you need more information about how to start an agency please do reach out to us we would be happy to help all right until the next time have a wonderful day