This post is part of a series sponsored by AgentSync.
If you have just started as a small agency, as a company or IMO, you may initially struggle to get appointments as carriers, but perseverance is the key to your success.
Especially right now, with the revolution of working from home removing some of the barriers that geography poses, it seems like starting your own insurance agency as an attractive option for entrepreneurs with industry experience. When technology and external forces shake up the industry, there are many new opportunities for those who want to join it, and for long-term employees in the industry who want to try new things.
For those whose long-term dreams for their insurance agency are beyond the day-to-day retail of insurance ̵1; say those hoping to become managing general agents (MGAs) or managing general underwriters (MGUs), or planning to have an insurance marketing organization (IMO) network – to secure A contract with an operator can be a serious obstacle to achieving these goals.
Before we dive into any of the roads to get meetings with carriers in your early days, just a quick reminder: We are not lawyers, and insurance regulation is multifaceted and fragmented in states. So, this is a current guide with points to keep in mind to get started on your agency journey, this is not legal guidance that will make you lose your grip if you are on the wrong side of a regulator.
Why is it difficult to get an insurance company agreement?
Two people touch your palms to illustrate how you managed to connect your insurance agency to a meeting with the carrier.
Carriers are often reluctant to negotiate contracts with smaller agencies. Larger carriers are looking for ways to gain market share through the fastest possible routes, which generally means working with agencies that have the largest producer load.
However, getting a carrier contract is the key to recruiting good producers. Writing with carriers that have attractive products attracts top producers. And getting top producers makes it easier to win advantageous contracts with carriers. This is a bit of an eternity machine, where it’s hard to say which comes first. But realistically, you need to deal with contracts and appointments quite early in your business.
Why do carriers prefer to work with larger insurance companies?
There are some main reasons why carriers are inclined to work with larger agencies and not inclined to sign with smaller agencies:
- Insurance companies do not want to put the work into a contract with an agency that will be swallowed up in next year’s M&A activity.
- Carriers pay their lawyers to draw up contracts, and putting a contract with smaller agencies means less ROI as far as the time of their legal teams.
- Operator services such as in-house developed products and services with limited access are more easily expanded to larger agencies whose distribution models are already secured.
- New and small are both risks for carriers. Inexperience can mean having processes that are not built to support robust compliance activity, which means greater risks for the carrier.
Unless you have a few hundred producers on board directly outside the port, it will take a lot of thought and effort to consider how to get appointments to the carrier.
Even more than other beginners IMO, FMO, etc., an agency that starts as a sole proprietorship is facing roadblocks. First, many states will not extend an agency license to a single company with only one affiliated producer. So know that when you go in you need your downstream producers in a row if you want to be taken seriously in the industry.
Get an operator appointment indirectly – aggregators, MGAs / MGUs
Because it can be so difficult to secure a contract with a carrier before you have a robust pipeline of producers, many first start by securing contracts through upstream agencies such as FMOs, aggregators or MGAs or MGUs.
If you go this route, first think about the operators you want to meet with. Knowing in advance which operators you want to join can give you an idea of how many major agencies you need to work with to achieve that list, as well as help you achieve your partnership goals.
There are pros and cons to working with a field marketing organization (or its insurance marketing counterparts or national marketing organizations) compared to an aggregator versus an MGA or MGU. Everyone has different types of services and support to offer, whether it is more marketing resources, better commission rates or more exclusive products. Whichever path you decide to take, each of these types of insurance intermediaries can give your agency access to carrier contracts and meetings that you can struggle to secure on your own.
How to establish a relationship with a carrier
If you intend to work directly with carriers, you will need to cultivate a relationship with your prospective partners in order to obtain a contract.
Think about which carriers and products you want to represent and why. Then keep the following in mind when making your pitch:
- Sometimes less is better – finding an operator who has experience working with new agencies can give you a boost.
- Be aware that your contract can be very generic. You are not in a good position to negotiate good deals, and you need to prove that you can build a distribution network.
- Open up your plans – be ready to show your strategy and emphasize what sets your agency apart. You have to drive into the edge, which makes you a cut above, to enthuse your carrier to work with you.
- Drive to your process. If you can show that you have processes and technology in place that keep your manufacturers compatible * cough if you have AgentSync cough * then you can remove the fear that new agencies pose great risks to a carrier.
- Operators who use just-in-time meetings may also be more likely to give you a chance as they may have to wait to pay for state meeting fees until your producers have submitted deals.
Once you have established a connection, you must obtain the contract and the meeting paper and send it back via your carrier partners so that they can officially designate your meeting with the state.
Carriers have their own appointment processes and are ultimately responsible for complying with state laws. Some states only require carriers to maintain internal lists or annual updates to the state for appointments. Other states only require carriers to designate the individual agency / DRLP. However, several states require carriers to designate all producers who write on their papers.
Even if you sometimes just need to get your agency designated and then allow your individual manufacturers to sell under an umbrella designation, only a few states actually allow it (a not uncommon misconception in the insurance industry, to be sure).
Establish a working relationship with a carrier
Whether you work directly with a carrier or through an umbrella of an upstream agency, you need to be a little familiar with the designation requirements for the different regions in which your producers work. easy to work with can move you up on an operator’s list of preferred partners.
This is where it will pay off to put the work into your own producer onboarding process before applying for operator appointments. If you have a streamlined process for initiating, storing and maintaining information for background checks, CE, license validation, etc., connecting to an operator or upstream agency’s own process will create full stack efficiency with fewer disruptions in everyone’s business flows.
Being aware of these differences and state-by-state requirements can help you have a compatible working relationship with a carrier. Conversely, operators waving these meeting processes for your agents throw up a red flag, and you should consider whether you want to be in their insurance distribution channel with the summary risks they take on (and thereby share with you).
If you are interested in technology that will position your new agency as the best possible insurance company partner, see how AgentSync can help.