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
  • Resouces & Training  –  EFFECTIVE AGENCY MANAGEMENT
  • Marketing & Sales  –  NEW BUSINESS & RETENTION

Below is a small excerpt from our “Steps To Setting Up An Independent Agency” document:

Getting started

  • Store Front – heavier PL agencies or agencies with existing business
  • Home Office – agencies looking to save on expenses or just starting out
  • 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 companiesmay bedeposited 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.
  • 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, RingCentral, etc.  There are a ton of VoIP providers, you need to find the one that you feel comfortable with.
  • Fax/Modem line – 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.
  • E-mail address – important for low-cost communication with Tague Alliance, clients, and companies.
  • Fast internet – this is typically provided by your local cable company
  • E-Signature – in today’s world you must offer your clients e-signature.  Insuresign is a great provider, DocuSign, and Hellosign are all great options that are affordable.
  • Website – use turnkey insurance template websites exist.  Keep in mind you may want to consider having your website build for you on the WordPress infrastructure so you have the ability to switch developers if you ever want this option.  When you have a site built in a proprietary structure through GoDaddy or Yahoo or Wix or Squarespace, etc. (nothing wrong with any of these providers) their site builders are easy to use for the do-it-yourselfer, but you are locked into their system.
  • 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.  A really good scanner is the Fujitsu 5120c ($800 roughly) 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.  Tague uses the Fujitsu and it works great.  In addition to Microsoft Office, you will need a PDF writer software like Adobe Standard or PDF Factory, 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 options: FSC Rater runs about $250/mth.  FSC does real-time rating and manufactures or creates the rates based on the carrier’s DOI filings.  The second option is EzLynx (Tague partner and the system is run by Tague) which is a “real-time rater” meaning that the system actually generates real rates directly from the insurance carriers websites.  This option costs nothing to start and $100/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 ADR (American Driving Records) 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 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!

If you would like to get a copy of our entire “Steps” document you may request a copy by sending an email to (mention “Steps”).


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!