re: To Insurance Agents: Captive or Independent?

Some agents aren't valuable. Some agents are merely order takers, and/or salespersons. Some insurance consumers do not have extremely complex accounts, or any kind of net worth worth to protect.

Claims in the aggregate never impact most consumers of insurance. So the law of large numbers works in favor of many without an adequate risk management program. Just as some buy and hold strategies are flawed, but work out in people's retirement plans. Or any other business.

So to a large degree, for average insurance consumers, they can just shop around for cheap. And most times it works out fine. The vast, vast majority of times actually. But sometimes, as an example someone who isn't willing to spend a couple of hundred bucks on a personal liability umbrella, people find out the hard way.

It's pretty simple really, if your decision is to purchase liability limits of $300K, and your net worth is in excess of that, that logic some would find flawed. But people are welcome to make this choice, and many do.

And I have no issue with it. But after the fact, I won't give me advice away for free. The first one is always free, after that I charge a consulting fee. Some choose to pay it, some don't.

A lot of the guys who think agents are "order takers" don't realize the "order taker" makes 300k+ a year,paid off his home a decade ago, answers to no one, works maybe four days a week,takes off five weeks a year, and took carrier-sponsored trips to Rome and Antigua last year. And that he takes secret pleasure that the customer who condescends to him only makes $68,000 a year when he verifies income for that disability rider he is adding to the policy. Such are the mysteries of The established insurance producers universe. Somebody must find some added- value in what they do. I know a lot of these guys,and you might be surprised at how their clients value their expertise.

Me-I'm hoping encyclopedia sales make a comeback. I could knock that shite out of the park. Until then I'm firing up the Yugo and going to work at the produce stand every day. I'm happiest around papaya and squash.

I would imagine it's like any other industry. In some cases you may be buying from an "order taker". But if you find a good agent, you should be relying on their expertise. I'm willing to allow a "travel agent" (as another person mentioned) to make a commission on my purchase if she can add some value. I certainly don't know the ins and outs of each industry, thus I rely on a professional to provide advice based on my needs.

My view of insurance is to not only protect what I have now, but also what I may have in the future. If you're buying solely on the cheapest price you can find online, I think you may be shorting yourself. For example, Progressive touts this "name your price tool". So, if I want to spend $80 a month, they will provide me with state minimum liability coverage with $1500 deductibles for Comp & Collision. Yeah, I got coverage for $80 a month, but what did I really get?

For me, I would rather an agent to work with me to find out what I need. From what I've seen the prices online versus buying from an agent are usually very comparable. Depending on your circumstances, you may find better pricing through an agent that knows where to find what you need.

I don't know really what to tell you except my experience. I made very little money for quite a long time. But we're smaller, and I did it differently. Don't discount the value of smaller accounts, it is good business. I stayed the course. I made what I still consider to be mistakes today. I chased huge, service and labor intensive accounts to attempt to increase revenue/income. I wish I hadn't written some of that stuff.

Enjoy the journey. Some of the funnest times I ever had were when I was building the business, and broke. The most I could afford for a vacation was driving to Kansas City, where hopefully the weather was in the 50's or 60's, to golf for a weekend.

From a business perspective, balance running your business with selling. Your automation system should allow you to do an income statement and balance sheet every month. Do this every month. Watch the value of the business grow, even while your income might not be growing. When you get down, read an article from your trade association about agency valuations. If you're an entity where K1 income flows to personal income do the following as you pay tax on distributions whether you take them or not. Keep some or all of the current year's revenue in the entity, and take out some (not all if possible) of the previous year's revenue. You'll need money to operate, and from time to time, you'll need to advance funds (lend) to clients.

Never lend money to, or advance premium on behalf of contractors, or most businesses that are real estate related. Don't get overly on the hook for a large agency bill account. Try to avoid agency bill at all costs. If you add value to a certain class of business or client, and it's legal, charge consulting fees in addition to receiving commission. You'll need to disclose this. Make sure your E&O carrier covers this area of your practice.

Revenue doesn't always equal income. Revenue doesn't always equal profit. Don't do business with dishonest people. Don't whore out your key carriers. Regional carriers are your best friend, nation carriers not as much. Watch brokers closely.

Have an attorney who is competent and your friend. Your banker as well. Some other professionals. As quickly as possible learn that your staff/employees will never care as much about your business or clients as you do. Also learn that this doesn't make them bad people, it is just a fact.

Edit. No matter how large you grow, keep some control over signing checks and reconciling bank statements. Due to the business you're in, you're going to see other business get robbed by employees. This includes banks, governmental entities etc. Where they have corporate procedures in place, and they seemingly are smarter than everyone else. Simply being able to understand your own business accounting, and having your signature required on checks largely prevents this.

Edit Edit. Pay your nets to carriers in a timely manner. I will assure you, someone from agency accounting has a direct line into the insurance carrier president's office. Even at T50 companies. Especially regionals.

Edit Edit Edit. Obviously some clients are better than others. So this applies to very good, loyal clients. I get my haircut and straight blade shave from a client. My tax attorney, and his firm are a client. My meat is purchased from a client. After I got flooded, I used the better contracting clients, without bid. I buy my cars from a client. My bank is my client, and I'm on their board. And none of these clients had ever whored me out to save a miniscule amount of money, so I didn't, and don't bid them out either. All agents say their clients are their friend. It is true sometimes. I golf, fish, take trips etc with all of these guys.

Edit Edit Edit Edit. Don't involve yourself in employee/carrier January 1st drama. Merely tell them you want 1/1 completed by mid-December. Don't play the game about holding back insured's renewals or quotes if they are getting quotes elsewhere. Give them your best shot, if they're going to leave you, they're going to leave you. They will respect you for not playing last minute games. I never go back after commercial accounts that leave. The number of times I received telephone calls asking me to take them back is stunning. They are running a business, some better than others, and they need the insurance expense for budgeting. Don't be a typical agent playing the last guy in wins game. It's hugely disrespectful, and not playing this game quickly weans your book of business away from clients who are 100% price driven. A large profitable business wants a partner, not a price whore.

Thanks a lot, Iowa, and everyone else that gives information here.

quote:

---

then the agent isn't a necessity (unless I am missing something)

---

A good agent should know his products. Also know how to give you the best price with those products. Too many times people use the internet, but miss out on discounts that could save them extra. The market it highly competitive and they should be attempting to bring more value than that of an ID card. They're expertise usually is assisting you with a claim. Do you want to be on the phone dealing with claims or do you want your agent taking care of that?

Someone gave it a thumbs down. Like there is a ton of bad business advice in there like do business with dishonest people, and lie and cheat a bunch.

No wonder elections go the way they do.