This post is part of a series sponsored by AgentSync.
If you are just starting out as a small agency, as a company or IMO, you may initially have a hard time getting carrier appointments, but persistence is the key to your success.
Especially now, with the work-from-home revolution removing some of the barriers represented by geography, starting your own insurance agency seems like an attractive option for experienced entrepreneurs in the industry. As technology and outside forces rock the industry, there are many new opportunities for those looking to join in, and for long-term employers who want to try new things.
For those whose long-term dreams for their insurance agencies extend beyond the day-to-day retail sales of insurance – for example, those who hope to become general management agents (MGAs) or manage general insurance companies (MGUs), or who are planning to acquire an insurance marketing organization ( IMO) Network – Obtaining a contract with a carrier can be a serious barrier to achieving these goals.
Before we dive into some of the paths to getting carrier dates in your early days, just a quick reminder: We’re not attorneys, and insurance regulations are layered and divided across states. So, this is a topical guide with some points to consider to get you started on your agency journey, this is not a legal guide that will get you out of trouble if you find yourself on the wrong side of the regulator.
Why is it difficult to get an insurance company contract?
Two people touch their palms to show that your insurance agency has successfully linked your carrier’s appointment.
Carriers are often reluctant to negotiate contracts with smaller agencies. Larger carriers are looking for ways to gain market share through the fastest avenues possible, which generally means partnering with agencies with the largest loads of producers.
However, having a carrier contract is essential to hiring good producers. Writing with carriers that have attractive products that attract top producers. Acquiring major producers also makes it easier to win favorable contracts with carriers. This is a perpetual motion machine, as it’s hard to tell which one comes first. But, realistically speaking, you will have to deal with contracts and appointments very early in your work.
Why do carriers prefer working with larger insurance agencies?
There are a few main reasons why carriers tend to work with larger agencies and don’t tend to sign with smaller agencies:
- Insurance companies don’t want to put the business into a contract with an agency that will be swallowed up in M&A activity the following year.
- Carriers pay attorneys to enter into contracts, and entering into a contract with smaller agencies means a smaller return on investment in the amount of their legal team’s time.
- Carrier services such as proprietary products and limited access services are more easily extended to larger agencies whose distribution models are already secured.
- New and small are both risks for carriers. Inexperience can mean that there are processes that are not built to support strong compliance activity, which poses greater risks to the carrier.
Unless you have a few hundred producers on board right outside the gate, thinking about how to get carrier appointments will require a great deal of thought and effort.
Sole Proprietorship
Even more so than other IMOs, FMOs, etc., an agency that started as a sole proprietorship faces hurdles. For one thing, many states won’t extend the agency’s license to a sole proprietorship with only one affiliated product. So, know that you will need to line up downstream producers if you want to be taken seriously in this industry.
Get carrier appointment indirectly – compilers, MGAs/MGUs
Since it can be very difficult to get a contract with a carrier before you have a strong pipeline from producers, many first start securing contracts through upstream agencies such as FMOs, aggregators, MGAs or MGUs.
If you go this route, first think about the carriers you’d like to get appointments with. Knowing which carriers you’re looking to join in advance can give you an idea of how many larger agencies you’ll have to partner with to make this list, as well as help you target your partnership goals.
There are pros and cons to working with Field Marketing Organization (or its insurance marketing organization or counterparts in a national marketing organization) vs assembler vs assembler vs MGA or MGU. Each has different types of services and support to offer, whether it’s through more marketing resources, better commission rates, or more exclusive products. No matter which path you decide to take, every type of insurance business intermediary can give your agency access to carrier contracts and appointments that you may struggle to secure on your own.
How to establish a relationship with the carrier
If you are intent on working directly with carriers, you will need to establish a relationship with your intended partners in order to secure a contract.
Consider the carriers and products you want to represent and why. Next, keep the following in mind when making your bid:
- Sometimes smaller is best – finding a moving company with a proven track record of working with new agencies can give you a boost.
- Know that your contract can be very general. You are not in a good position to negotiate great deals, and you have to prove that you can build a distribution network.
- Open your plans – be prepared to show your strategy and emphasize what sets your agency apart. You will need to drive your own edge, what gets you going, in order to excite your carrier to work with you.
- drive for your process. If you can demonstrate that you have processes and technologies in place that keep your producers compliant *cough if you have AgentSync cough*, you can eliminate that fear of new agencies that pose major risks to the carrier.
- Carriers who use timely appointments may also be more inclined to give you a chance because they can defer paying government appointment fees until your producers present their business.
Once you make a connection, you’ll need to get your contract and appointment papers and send them back through your carrier partners so they can officially schedule your appointment with the state.
Carriers have their own designations, and are ultimately responsible for following state laws. Some states only require carriers to maintain internal rosters or annual state updates for assignments. Other states only require carriers to designate the Single Agency/DRLP. But the multiplicity of countries requires carriers to designate all the producers they write on their paper.
While sometimes you just need to designate your agency and then allow individual producers to sell under a blanket appointment, only a few states actually allow this (a misconception that’s unheard of in the insurance industry, sure).
Establishing a business relationship with the carrier
Whether you work directly with a carrier or through an upstream agency umbrella, you’ll need to be somewhat familiar with the designation requirements in the different regions in which your product operates. As states take different approaches to producer appointments, being informed and easy to work with can get you to your carrier’s preferred partner list.
This is where working on your product setup before looking for carrier dates will pay dividends. If you have a streamlined process to start, store, and maintain information for background checks, CE certification, license validation, etc., connecting to the process of the carrier or upstream agency will create complete efficiency with fewer disruptions to everyone’s work flow.
Being aware of these differences and country-by-state requirements can help you have a compatible business relationship with the carrier. Conversely, carriers who wave these assignments to your agents raise a red flag, and you should consider whether you want to be in their insurance distribution channel with a summary of the risks they face (and in doing so, sharing with you).
If you’re interested in the technology that will position your new agency as the best possible partner for insurance companies, see how AgentSync can help you.
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