Start an Independent Insurance Agency
Your step-by-step guide to starting an independent agency in Texas
We have dozens of reasons for loving the independent insurance industry. We won’t list them all here, but one big reason is that independent insurance agencies offer Texans a wonderful entrepreneurship opportunity—a chance to build a business, serve your local community, create jobs, and make money.
If you’re interested in starting an independent insurance agency, your first step is to read this entire page. (Be sure to view the documents too.) Your second step is to become a member of IIAT to get access to the support you’ll need.
Step 1: Lay the Groundwork
Do the research and make the necessary preparations to set yourself up for success.
Learn about the independent insurance industry
If you have worked at a “captive” agency, you’re ahead of the curve. But there are plenty of differences between captive and independent agencies. If you join IIAT, you get access to hundreds of training classes.
Establish a Realistic Timeline
Launching an independent insurance agency will take you at least six months. Precisely how long it takes depends on how much time you devote.
Get Legal Advice
This is especially important if you are in a situation that might have non-compete or other contract-related issues.
Independent agencies aren’t as capital-intensive as many businesses, but you will need at least $40,000 to pay for your start-up expenses—e.g., office space, equipment, E&O insurance, and marketing. This doesn’t include the money you’ll need to live on while you build your customer base.
Get Access to Markets
You cannot sell insurance without access to insurance companies and managing general agents. Most insurance companies want to establish a long-term relationship (especially property and casualty insurance). To get an appointment with these companies, you will need some experience, a track record of selling, coverage of a territory that’s desirable to the company, and a quality business model. IIAT members can get access to standard admitted markets through the IIAT Advantage program.
A Mix of Skills
Some people are great at sales. Other people are great at service and administration. To start an agency from scratch, on your own, requires that you have both skills (until you can hire other people to help). IIAT offers training to help you gain the expertise to excel at insurance.
Your customers are trusting you to help manage risk. You must understand what you’re selling them. There are scores of policy forms and coverage implications, and they are regularly updated. Independent insurance sales is a knowledge-intensive pursuit. IIAT's InfoCentral provides an in-depth database of insight on coverage issues, forms and endorsements, and policies.
Step 2: Create Your Business Plan
If you want to create relationships in the insurance industry—and you do, trust us—you need a formal business plan. Here are the five things your business plan must include.
You need to describe every person who will work at your agency. Include their resumes, which should describe past professional experience, skills, and industry knowledge. Without a track record, attracting carriers and customers will be more difficult. If you don’t have much (or any) experience in the insurance industry, mention the people you know in the industry. Remember, becoming a member of IIAT is the quickest and easiest way to build relationships.
Explain how you will get customers, which products and services you will offer, and any advantages you have over your competitors. Demonstrate, in detail, that you know who your customer is and why they’ll choose you over your competitors.
The Business Environment
Illustrate that you understand the larger business environment. Describe how your agency will impact, and be impacted by, the economy, regulations, labor, supply, customer markets, suppliers, competitors, etc.
Don’t paint a perfect picture. Prove that you are aware of the risks of starting and running your own agency. The best business plans identify risks and how they’ll resolve them.
Finances (“the Numbers”)
Where will your revenue come from? Be realistic. When will it arrive? How will it be used? Insurance carriers will want to know your growth projections. At a minimum, you should have a start-up budget, a cash flow projection, and a production forecast.
Step 3: Get the Legal Stuff Right
There are many rules and regulations that apply to operating an insurance agency in Texas.
Decide Your Entity
You can set up your agency in three ways: sole proprietorship, partnership, or corporation. Sole proprietorships are the least expensive and easiest option, but they carry the risk of personal liability for the owner(s). Partnerships and corporations offer more protection, but setting them up is more expensive and complicated.
Register with the County or State
All businesses in Texas operating under an assumed name must file for an Assumed Name Certificate with the county clerk’s office in the county in which the business is primarily located. Partnerships and corporations must file an Assumed Name Certificate with the Texas Secretary of State (in addition to a separate Assumed Name Certificate with the county. Keep this Certificate handy as you’ll need it when you go to apply for E&O insurance).
Obtain an IRS Identification Number
The IRS requires an ID number for every entity. This number is used in the administration of tax laws. If your agency is a sole proprietorship, your social security number is your tax ID number. If you’re a partnership or corporation, you’ll be given a Federal Employer Identification Number (FEIN).
Your agency will be one of your greatest assets and you’ll want to protect it with errors & omissions coverage. We can help you learn about and get E&O insurance.
As a sole proprietorship, a general lines property and casualty license will be issued to the individual. But that individual must file a form to register an assumed name under which he or she will operate. Partnerships and corporations must get a separate license from the Texas Department of Insurance (TDI).
Step 4: Get Access to Insurance Markets
Ideally, you will schedule appointments with established insurance carriers that have broad, competitive insurance products. But that’s difficult to do without at least three years of experience and a sizable book of business. For most start-ups, market commitments come from a combination of a few possible direct appointments and/or indirect markets, such as wholesalers, managing general agencies, and market aggregators.
Direct Appointments = If you become an IIAT member, you automatically become a member of the Independent Insurance Agents & Brokers of America (Big “I”). This will expand the number of insurance markets at your disposal.
IIAT Advantage = This is the name of the IIAT insurance marketplace, which is receptive to working with new agents. Learn more about IIAT Advantage.
Wholesalers & Managing General Agents = Wholesalers and MGAs represent insurance companies. They’re receptive to new agents, and they’re able to offer specialty insurance. Many will have few or no commitments, as they retain a portion of the commission and are compensated per transaction through policy fees (which are passed along to the customer). The Texas Surplus Lines Association has information on wholesalers and MGAs.
Market Aggregators = These groups help new agents set up their first office, access otherwise inaccessible markets and programs, the chance to get direct appointments, and a chance to share in the network’s profitability. In return, they ask for a percentage of commission, a membership fee, or give up a small stake in the value of the book of business built up through the aggregator. Review the contract carefully, especially as it relates to book ownership, commission, revenue sharing, and exit costs.
Step 5: Get an Agency Management System (AMS)
An agency management system (AMS) is software that will be fundamental to your agency’s success. Your AMS will provide a framework to all of your business processes. The most successful agencies operate as digitally as possible.
Agency management systems range in cost—from $1,000-$5,000 for a start-up, with monthly fees of $60-$600. A high-quality AMS will more than pay for itself in time.
When you join IIAT, you also become a member of the Independent Agents & Brokers of America, which has an Agents Council on Technology. The ACT website has resources to help agencies harness technology to maximize productivity and profitability.
Step 6: Create a Procedures Manual
It’s estimated that 1 in 5 insurance agents in Texas will be involved in an errors and omissions (E&O) claim. To avoid this, create a procedures manual, which creates structure and guidelines for how you conduct business. Your procedures manual should be updated regularly.
Step 7: Get Training
If you’re going to be successful, especially in the long term, you need to regularly educate yourself. IIAT offers its members hundreds of training opportunities.