New Agency Toolkit

This toolkit is designed to educate and assist in the process of starting an independent agency, but it is up to you to make it happen. Building an agency from scratch is possible. If you're successful, the rewards are considerable, including the ability to call your own shots, a healthy return on investment in the form of owner’s equity and the satisfaction of being in a business that protects people and their valuables. On the other hand, starting an agency from scratch is challenging.

THE GROUNDWORK
How to get started 

• Capital – While an independent agency is not capital intensive relative to other industries, you can expect to need approximately $40,000 to $50,000 in start-up capital to pay for things such as office space, equipment and furniture, E&O insurance and marketing; and that doesn’t count resources necessary to live on while you build your customer base.

• Access to insurance companies – You can get licensed but you can't sell insurance without access to insurance companies and managing general agents. For property and casualty insurance, most companies are looking for a long-term relationship. Getting an appointment usually requires, among other things, experience in the business, a track record of successful marketing and selling, a marketing territory geographically desirable to the companies and a solid proposed business model.

• Good sales and administrative skills – Some people have great selling skills and can make great insurance producers. Other people are great at administration and service. Starting an agency from scratch will require both sets of skills until you get large enough to hire others.

• Thorough technical expertise – Customers are placing their risk management needs in your hands, therefore you need to understand the products you're selling. Depending on the lines of business you intend to offer, there are scores of different policy forms and coverage implications. Add to that the importance of understanding the risk management process itself, and you have a very knowledge-intensive profession.

If you're still interested, this toolkit will walk you through the steps necessary to get started and provide resources to help you implement the steps where possible.

THE GROUNDWORK
How to get started

Laying the Groundwork

• Establish a realistic timeline. Starting an agency will take time. How long it takes depends on your situation and how much time you have to work on it. It almost always takes more time than you think it will. Expect at least six months to arrange financing and two weeks to obtain E&O insurance.
• Obtain qualified legal advice. This is necessary if you're in a current relationship that may involve non-compete or other contractual-related issues.
• Get an overview of the independent agency system and an introduction to basic insurance knowledge. If you have operated your own captive agency, you are ahead of the curve (especially if you were able to establish a book of business outside the captive market). You understand how an agency works and are versed in the technical aspects of insurance contracts; however, for as many similarities between owning a captive agency and owning an independent agency, there may be just as many differences.

Downloads & Links

 Agency Management Consultants

 Overview of Independent Agency System 

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THE BUSINESS PLAN
Five things every business plan should address

Create the Business Plan

We will not bore you with the “not planning is planning to fail” lecture, but just about every industry relationship you need will require a formal business plan. This includes carrier prospects for appointments and E&O insurance providers. The business plan consists of a narrative, resumes and several financial worksheets. The five things every business plan should address are:

1. People – At its core, the fundamental value of any agency is in the capability of its people to execute its objectives. Therefore, your business plan should include information about the people who are responsible to execute it. At a minimum, include resumes on each of the key players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities possessed by each. For start-ups, a lack of a demonstrated track record may inhibit your ability to attract prospective employees, customers and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be known in the community and/or industry.
2. The opportunity – A key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire customers, including with what products and services and with what advantages over competitors. This section should demonstrate that you know who your customer is, what your products and services are and how you will position your products and services to be selected over those of your competitors.
3. The business environment – Your business plan should demonstrate that you have a keen awareness of the external business environment in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these factors is relevant to the operation of your agency.
4. The risks – Many business plans, especially those that will be used outside the agency to attract other stakeholders, often make the mistake of painting only a rosy picture; however, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced. Potential stakeholders, especially prospective carriers, will develop confidence in those agencies that pose the risks and provide strategies to resolve them.
5. The numbers – You need to have realistic expectations of where revenues will come from and when and how cash will be used; furthermore, insurance carriers will be interested in growth projections. At a minimum, you should have a start-up budget, a cash flow forecast and a production forecast.

Downloads & Links

 Business Plan Outline for a Start-up Agency

 Start-up Budget Worksheet 

 Cash Flow Budget Worksheet 

 Annual Production Calculator

E&O and LEGAL CRITERIA
Licensing, registration, tax ID, etc.

Meet Legal Criteria

1. Choose an Entity and Register With the State
   There are three broad categories to investigate when determining your business organization: sole proprietorships, partnerships and corporations. While sole proprietorships are the least expensive and easiest to create, they carry a risk of personal liability for the owners. Partnerships and corporations can provide further protection for the owners, but require more paperwork and cost.
   
    
2. Obtain IRS ID
   The IRS requires a Taxpayer Identification Number for all entities. This number is used in the administration of tax laws. If your agency is organized as a sole proprietorship, your social security number is your tax identification number. If your agency is organized as a partnership or corporation, you are given a Federal Employer Identification Number (FEIN).
   • Sole Proprietorships 
   • Partnerships 
   • Corporations 
   • LLC
3. Apply for E&O
   Before insurance companies will appoint you as an agent to sell their products, you will be required to obtain professional liability insurance (also known as Error & Omissions Insurance). Since this is a new independent agency, and professional liability policies are on claims-made policy forms, your new E&O policy will have a retroactive date of the policy inception. In addition, since your agency is new and there is no previous information to reference, the E&O carriers will essentially have to underwrite you, as the owner, and your goals for the agency. E&O carriers will require a business plan and resume with all new applications. IIANM insurance products, also known as "Big I Advantage", is part of a national purchasing group featuring many insurance markets, including E&O coverage. For this reason, IIANM membership is required before your E&O application can be processed.
4. Join IIANM
   The association is here to help members succeed. IIANM offers support through education, insurance market placement, technical advice, governmental advocacy and agency management support.

5. Obtain Licenses
   For sole proprietorships, a general lines property and casualty license is issued to the individual. For partnerships and corporations, the entity must have a separate license filed with the New Mexico DOI called a 'Business Entity License'.

 

Downloads & Links

Choose an Entity

 Starting A Business in New Mexico

Register with the State

IRS ID

 Sole Proprietorships

 Partnerships 

 Corporations 

 LLC 

E&O

 Westport Application

 Helpful Hints for Completing an E&O Application

Join IIANM

Member Benifits 

 Agency Member Application

Licenses

 Individual License Applications

 Business Entity License

ACCESS TO INSURANCE MARKETS
Secure direct appointments & indirect markets

Secure Market Commitments

Direct appointments with a variety of established carriers that have broad, competitive insurance products to offer is the ideal situation; however, they are very hard to come by unless you have at least a three-year track record and a sizable book of business that you will bring to the table right off the bat. For most start-ups, market commitments will have to come from a combination of a few possible direct appointments and/or a variety of indirect markets such as wholesalers, managing general agencies and market aggregators.

1. Direct Appointments
   IIANM's Membership Directory (see Associate Member section) lists many of the insurance companies that operate through the independent agency system; however, you will need to be a member to access this resource. To assist you with this critical step, we suggest making an appointment with IIANM for individual guidance.
2. IIANM Advantage Markets/MGAs/Wholesalers
   IIANM Advantage as well as many managing general agents and wholesalers are receptive to working with new agents. Many will have little or no volume commitments and are compensated per transaction through policy fees that are passed on to the customer. .
3. Market Aggregators
   Market aggregators provide assistance to new agents in setting up their first agency office, access to otherwise unattainable markets and niche programs, the opportunity to obtain direct company appointments and a chance to share in the network's profitability. In return, these networks usually ask agents to pay a percentage of commission, a membership fee, or require them to give up a small stake in the value of the book of business built up through the aggregator. Be sure to review the contractual relationship with these entities carefully, especially as they relate to book ownership, commission or revenue sharing and exit costs.

Downloads & Links

Direct Appointments

 IIANM Advantage Markets 

 Aggregator Guidebook.pdf 

Participating Trusted Choice Companies Actively Searching for
Appointments
(members only area)

AGENCY MANAGEMENT SYSTEM
Framework for all the necessary business processes

Choose an Agency Management System

A fundamental building block for today's successful independent insurance agency is a good agency management system that can provide a framework for all the necessary business processes. The most effective independent agencies have maximized the ability to operate as digitally as possible, minimizing double entry and moving paper. Agency management software can range in cost from less than $1,000 to $5,000 for a start-up operation with monthly fees of $60 to $600, depending on the level of sophistication you desire. It is advised that a new agency should not skimp on agency management software since it will pay in the long run to operate as electronically as possible. When you join IIANM, you also become a member of the Independent Agents & Brokers of America, IIABA. IIABA sponsors an organization made up of independent agencies, carriers and technology vendors called the Agents Council on Technology. The ACT website has numerous resources to help agencies harness technology to maximize productivity and profitability.

Downloads & Links

 IIABA Agents Council for Technology (ACT)

 Checklist 

 Choosing an Agency Management System

WORKFLOW PROCEDURES
Develop a written procedures manual

Establish Workflow Procedures

In New Mexico, it is estimated that one in five agents will be involved in an E&O claim. One of the best ways to avoid this potential is to create and develop a written procedures manual. This document should be fluid and adaptable to meet the market and client demands, but should also establish some structured guidelines to enforce the way you want your business handled.

IIANM and IIABA have abundant resources in our 'Virtual University' for helping you develop procedures for your agency. However, whether you purchase templates or create your own from free member downloads, this process is very time consuming and needs constant updating as your agency matures. Plan on spending a least a month to prepare your initial manual.

Downloads & Links

Virtual University

ADDITIONAL TRAINING
Technical and management

Obtain Additional Training – Technical, Management

Depending on your level of industry experience, or your level of expertise in the various lines of business you intend to offer, IIANM offers a broad array of training resources to fit your needs.

Downloads & Links

 Agency Staff Diagnostic (Free) Scroll to bottom of page

 Education Calendar

 Virtual University 

 Training Needs Checklist

RECRUIT
The right staff for the right roles

Recruit Staff

Whether you need staff right off the bat or down the road, recruiting the right talent for the right roles is not easy, especially if you're doing everything in the agency yourself. IIANM's provides a job bank, to assist you with free classified ads. IIANM members also receive exclusive discount pricing on personality testing products in the industry.

Finally, once you have hired your staff, IIANM provides members with a customizable orientation manual to help make their transistion to your agency as smooth as possible.

Downloads & Links

 IIANM Job Bank

 Caliper 

 Employee Orientation