Should You Open An Independent P&C Insurance Agency?

Anyone who has had the pleasure of reading the E-Myth can tell you that being a good “technician” (insurance producer) does not equate to being a good “entrepreneur”.   Just because you can sell insurance does not mean that owning and managing an independent insurance agency is right for you.

In fact, it takes the average insurance agent 3-5 years to build up their book of business to a level that can sustain a comfortable lifestyle and a staff person.  Do the math: say you write $250,000 in new premium and you have solid policy retention of 90%.  If your goal is to have a $1,000,000 book of business it will take you about five years to get to your goal.  At $1,000,000 you can figure (with SIAA & Tague Alliance higher compensation) a conservative renewal commission base of 13.5% which equates to $135,000 per year in commissions.  On average we tell our member agencies to plan on 15% average new business commission.

The bottom line is that you must enter into ownership of an independent agency with one key element in mind: think long-term.  Most excellent businesses have taken years to grow to high levels of success and building an independent insurance agency with the help of Tague Alliance and SIAA is no exception.  The blessing to our members is that we are able to speed up the delivery of key carrier appointments, enhanced commissions, profit sharing, and plenty of resources.

If you are contemplating starting a scratch independent insurance agency ask yourself one key question:  Am I ready for the hardest three to five years of my life?  If you can confidently start with the end in mind and plan on having a few lean years while you are building your agency value then success may well be yours.  Dave Ramsey, the financial guru, has a good saying, “live like no other so you can live like no other.”  Simply put, there is no other business model that allows you to build a wide base of policies that pay you every six to twelve months like clockwork.   The power of the independent insurance agency model is all based on the renewal book.  A large and stable book of premium is what every insurance agency is working for.

Another key question you must ask yourself is this, “What am I really driven and passionate about?”  Meaning, are you in love with building relationships and selling or are you more of a planner and tactician.  If you find yourself enjoying the process of helping customers more than going into a networking event cold to work the room for referral partners, then maybe you should consider whether or not you are fit to start an agency.  On the other hand, if you want to be the person who works “on your business” and you bring in sales producers and marketers to bring in the business then you may find success.  For those people who love selling, but hate the details… NEWS FLASH… your new agency will burn to the ground in chaos if you do not have a consistent process in place to manage all of the critical back-end work and client service.  So for the passionate sales pro who wants to start an agency you need to realize that you will need some type of help fairly quickly to help you handle the details so you can focus on what you do best.  Figure out your individual strengths and weaknesses and build a plan that allows you to lean into your strengths and fill the gaps where you are weak.  Of course, when you are starting out you generally do not have much money to spend on filling gaps, so as the owner/operator it will be all you for a period of time.  Once you build enough revenue to hire a part-time person or virtual assistant or WAHVE (cool service Work At Home Vintage Experts) then you make the pivot in your structure.

One of the coolest benefits of being an independent P&C insurance agency owner is the fact that you get to build your agency into what you want.  If your goal is to have a two million dollar revenue agency with multiple producers and all that goes with it, it is completely possible with some years of hard work, a plan, and consistency.  If however, you prefer to build a business that is simple and allows you a wonderful work/life balance with the freedom to work from anywhere in the world then a smaller digital agency is totally possible.  Building an agency is like starting with a blank canvas and like a painter you must have a clear vision for the painting or end-result clarity.  Each brush stroke aka decision on your business canvass either adds or detracts from the work of art you are creating.  If done right, the modern independent insurance agency can be 100% digital and able to be managed from anywhere globally.  This means having the right systems and tools, a client first digital experience, and the proper mindset as an agency owner to create the right environment for your team and clients.

Remember this if you are considering starting an independent P&C insurance agency, our lifeblood is new business sales, but the true power of our business is the renewal commission.  We make money 24/7 as we build a book of business.  The key is building deep and lasting relationships with our clients and providing them an experience that is second to none.  Fortunately for you as a person considering starting an independent P&C insurance agency, most agents provide a poor experience for the clients.  This means that a fantastic agent has so much room to be successful in our industry.

What do all independent insurance agencies need to be successful?  There are a ton of things that are needed but a few critical items apply to agencies of all sizes.

  • Strong National and Regional Carrier Appointments (Personal and Commercial Lines)  – PRODUCTS
  • High Commission Levels (13-22%)  – INCOME & CAPITAL
  • Profit Sharing Opportunities  – INCOME & CAPITAL
  • Resources & Training  –  EFFECTIVE AGENCY MANAGEMENT
  • Marketing & Sales  –  NEW BUSINESS & RETENTION

Here are a few items that a Start-Up Independent Insurance Agency will need to put in place.  While average monthly costs will vary between agencies, you can plan on spending $1500-$2000/mth on your technology stack and other costs.  This assumes you are working from a home office and do not have any major fixed office expenses.  

Example of ongoing estimated monthly expenses:

  • Errors & Ommissions Insurance – $200-400/mth
  • BOP and Cyber Insurance for agency – $100/mth
  • Website provider (Advisor Evovled or Forge3) $175-250/mth
  • Email provider (Appriver) $50-$100/mth
  • Phone/Fax VoIP (Lightspeed Voice or Bluecloud) – $100/mth
  • Agency Management System (QQ Catalyst, EZLynx) – $250-$400/mth
  • Marketing & Pipeline CRM (AgencyZoom) – $150-$200/mth
  • Office 365 and software (esig, PDF, etc.) – $150-$250/mth
  • Video Meeting (Zoom, Teams) – $50/mth
  • ePayment Platform (ePayPolicy) – $20/mth
  • Comparative Rater Personal Insurance (PL Rating, EZLynx) – $100+/mth
  • Comparative Rater Commercial Insurance (Tarmika) – $150/mth

*The items above are not an exhaustive list, but are many of the core systems that an independent insurance agency needs to operate on a day-to-day basis.  As you evaluate vendors, make sure to try to work with platforms that integrate with each other via APIs as much as possible to reduce duplicate data entry.  Watch the video at the bottom of this page for more info on this topic.

Getting started

  • Store Front – much less important post COVID, and walk in prospects are not where most preferred Personal and Commercial Lines agents make their money.
  • Home of Executive Office – agencies looking to save on expenses or just starting out this is a great option. You must make sure that your digital communication capabilities are strong (i.e. video, website, social, automation, etc.)
  • Errors and Omissions – SIAA has a great program for new agencies that is revenue based tiered pricing through Rockwood Programs.  There are many other providers and you just need to Google for P&C Agent E&O
  • Join State Associations – optional – offer many services
  • Establish business name with your county office (cross-check DOI to see if the name you want is available)
  • Register name with the California Department of Insurance
  • Obtain Agency license for registered name of Agency and individuals
  • Tague Alliance Appointment Application with a business plan, copies of licenses and resumes.  Business plan should discuss where the business will come from, goals, utilization of Tague Alliance markets, marketing territory, and utilization of other resources. (1- 5 pages)
  • Establish two checking accounts
  • Premium Trust-The law requires that all premiums received from insureds be deposited into this account.  If audited you will be required to show that this occurs.  This account is usually used for Agency bill premium, and must at all times contain enough money to satisfy your obligations to your companies.  Being “out of trust” is serious and can result in revocation of an Agency’s license to do business.
  • Operating Account-Commission checks received from your companies may be deposited into this account.  Money not reserved for payment to companies (your commission) may be transferred into this account from the Premium Trust Account.   All Agency expenditures except company account currents should be paid out of this account.
  • Order “For Deposit Only” stamps for both accounts.
  • If you are going to accept credit card payments from your insureds, make arrangements with your financial institution to handle these transactions.  ***Note you may not co-mingle client funds in your operations account.  All monies made payable to the agency from a client for premium payments, etc. must be deposited into your Trust Account.  Check out a really nice payments provider called ePayPolicy
  • Purchase Date Stamp. All mail should be date stamped with the date it is received in the Agency. This is particularly important for correspondence from insureds.  The Agency copy of new and renewal policies and endorsement changes should also be date stamped.  Less and less paper mail comes these days, but you will still get paper that needs to be dated.
  • Order Agency Letterhead – envelops, business cards, stationary, branded materials, logo pens, etc.
  • Complete the Carrier Eligibility Packet (Tague Alliance) or do your own business plan document.  This builds your credibility and at the very least you should plan for success rather than wish for success!
  • Develop a Perpetuation Plan For Your Agency. Years of hard work on your part can be gone in a heartbeat if you have not made arrangements for the continuation of your Agency in the event of your death or disability

Opening the office

  • Phone line with voice mail  **Consider a VoIP provider as they provide a lot of services for little cost.  These systems run your phone through the internet so you need a high-speed connection in general.  Your local cable company may provide a VoIP business option or you can go with a stand-alone provider like BlueCloud USA, Lightspeed Voice, etc.  There are a ton of VoIP providers, you need to find the one that you feel comfortable with.  *If the provider can integrate with your Agency Management System (AMS) that is ideal.  Example: Lightspeed integrates with QQ Catalyst and Hawksoft, etc.  So when a client calls you get a screen pop and the call is recorded and logged automatically in your AMS.
  • Fax – you can either go with a digital fax from your VoIP phone provider or get a physical fax.  Keep in mind that your goal is to be as paperless and portable as possible.
  • Website – use turnkey insurance template websites from professional providers live Advisor Evolved or Forge3 who do a good job for agents as they have tons of features, great content, etc.  You can build your own website, but why waste time and money when you can use professionals and be up and running with a high quality website (your primary internet real-estate) quickly.  They can help guide you with purchasing your domain name for your agency and then launching your website.
  • Business email address is important for a professional appearance.  Some agents use @gmail or @yahoo which is ok, but less than ideal.  Remember that you only get one first impression with your prospects and carriers.  An email address with your business domain is is a very basic, but important item.
  • Fast internet – this is typically provided by your local cable company
  • E-Signature – in today’s world you must offer your clients e-signature.  Formstack Sign is a great provider, DocuSign, and Hellosign are all great options.
  • Hardware – don’t cheap out in this area, you will regret it.  With that said you can pick up a good HP or Dell desktop for about a $1000+ and be perfect. Look for lots of RAM (8-16gigs), big hard drive (2tb), fast processor (Intel dual or quad-core), and Microsoft Office.  Make sure to buy either a large wide screen monitor (40″+) or dual screen monitors.  It has been shown that efficiency goes way up with dual monitors, because you can have your application data and the carrier rating platform open on the screens and be much more efficient with data entry, etc. A really good scanner is important or you need to get an all-in-one printer/scanner/fax.  Just make sure that the scanner is fast and can do at least 30-40ppm.  Consider checking out the Brother ADS-2700W.  In addition to Microsoft Office, you will need a PDF writer software like Adobe Standard or NitroPDF, etc.  This will allow you to print any file into PDF which allows you to email and keep things paperless.  The less you have to scan the better and a PDF writer reduces the amount of scanning.
  • Management Systems – This is a matter of preference.  However, some of the really solid mid-priced providers have great features and benefits.  Check out EZLynx, QQ Catalyst.  The higher-end systems are provided by Applied Systems and Vertafore which are overkill for most small agencies, both from a cost and functionality perspective.  However, an agency will never outgrow Applied’s EPIC or Vertafore’s AMS360.
  • Rating – each insurance carrier has their own rating system.  In personal lines, you will want to use a “comparative rater” which quotes all your companies in one shot.  There are two primary options: PL Rating which runs about $120/mth.  PL Rating does real-time rating and manufactures or creates the rates based on the carrier’s DOI filings.  The second option is EzLynx which is a “real-time rater” meaning that the system only generates real rates directly from the insurance carriers websites.  This option costs nothing to start and $120/mth.  So your own situation will determine which vendor you use but these are two great options.
  • Point of Sale Reports – These are MVR and CLUE reports and will be needed for front-line underwriting.  Once you have a DMV Requestor Code you will want to get setup with Samba Safety or another MVR provider.  This will allow you to run your own MVRs when needed.  The preferred insurance companies like Hartford/Travelers integrate and pay for the MVRs in their rating systems.  Non-standard Auto companies may make you run your own MVRs.
  • You MUST obtain a DMV Requestor Code and Lexis Nexis Node ID.  You have to have both of these in order to get appointed with many of the carriers.  Be prepared for some frustration as the DMV takes up to a few months to process the Requestor Code application.  Once you have the Requestor Code then you can register with Lexis Nexis (the company that allows you to access CLUE for claims info).  The application with Lexis Nexis can take weeks to process as well.  The DMV Requestor Code forms can be found by Googling for them or Tague can also email a copy of the application as well.  Lexis Nexis is an online application which must be completed after you have an insurance company direct appointment who will sponsor your account and your DMV Requestor Code is already approved.

We hope the above-detailed information has provided you with a small window into a few of the things you need to consider, have, and prepare for when considering whether or not you should start an independent P&C insurance agency.  Best wishes on your journey!

Cheers from the Tague Alliance Team!


Here is an example of a help video on setting up your independent agency that we provide.  There are so many logistics to work through as a new independent agency, and you need to be ready to get sweaty and dirty as you pour the foundation of your new agency home.

The video above was put together by one of our members, Chris from Adelfia Insurance. We are stoked to have younger "insurpreneurs" starting new independent insurance agencies. Chris mentions some great tips such as needing to have at least a few years of P&C experience prior to deciding to launch your own agency, setting up his agency license, and other logistics. Chris is doing a great job and we are proud of his progress and effort to build an agency!
The Mediocre Middle - The bell curve of independent agents and their digital client experience. In today's Morning C4, I am talking about what I call the "Golden Circle of Integration" and 4 Core Systems every agent needs to be using to help provide a modern digital client experience. Hope this helps a few of my IA peeps out the wild world or our ever evolving insurance landscape! We are all either evolving or fading into mediocrity and decline. This is a binary honest with yourself if you are an agency principal or agency manager about where you are currently at and where you need to be headed.