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Preparing your agency for a carrier appointment

Once you obtain your license and license your agency, you can't sell insurance without access to insurance companies or managing general agents. Most, if not all, property and casualty insurance carriers are looking for a long-term, profitable relationship. Getting appointed with a carrier usually requires:

  • experience in the business,

  • a proven track record of selling and marketing,

  • a geographically desirable marketing territory,

  • a solid proposed business plan.

The ideal situation is to secure a direct appointment with a established carriers as most offer competitive products and commission schedule and opportunities for growth. However, as a new agency, a direct appointment will be hard to come by since many carriers desire at least a few years of experience, a successful track record and an existing book of business.

Access to markets may have to come from a combination of what direct appointments you can secure and indirect markets such as wholesalers, managing general agencies (MGAs) and possibly cluster organizations. A benefit in partnering with wholesalers and MGAs is that many have little or no volume commitments and compensate you per transaction through policy fees that sometimes can be passed on to the policyholder.

You might also explore joining an established insurance network. These organizations may provide assistance to new agents with access to otherwise unattainable markets and niche programs and possibly the opportunity to obtain an eventual direct appointment. Some groups offer assistance with access to carriers with lower volume commitments and profit sharing thresholds than with a direct appointment. You would have a chance to share in the network's profitability but in return, would pay a membership fee and percentage of commissions to the group. Be sure to review the contractual relationship with these entities carefully, especially as they relate to book ownership, commission or revenue sharing and exit costs.


Attracting markets   

Companies seek to do business with those independent agents who they feel will most enable them to meet their profitability objectives, i.e., those who 1) use "best business practices," 2) want to work as a team with the company and 3) operate in favorable geographic and regulatory environments.

There are several factors insurers consider in evaluating agency representation. They include:

  • Location and appearance — accessible to the public/desired clientele, professional operation.

  • Financial information — consistent profitability, good collection practices.

  • Type and mix of business — average types of clients, specializations, retention rate, volume of nonstandard business.

  • Other insurers represented — too many companies, duplication of markets, outlets for nonstandard accounts.

  • Loss experience — shock losses or poor underwriting by producers.

  • Personnel — professionalism, experience, turnover.

  • Business plan — projected growth areas, goals, ability to meet company production quotas.

  • Perpetuation plan — who will be running the agency five years from now? Ten years? How are they going to be trained for the job? What financial arrangements are involved and how are they guaranteed to be available?

  • Other insurers represented — how many (too many?) companies, duplication of markets, outlets for nonstandard accounts.

  • Automation — functions now being utilized, plans for future, company interface capabilities.

  • Completeness of submitted business — properly filled in applications, necessary data included (loss runs, pictures, etc.).


Writing a business plan    

A business plan should be a work in progress. That's because your business will evolve over time, and be influenced by outside factors such as the economy and local conditions. Even successful business owners should maintain a current business plan to ensure they remain knowledgeable on the elements that can affect continued success.

In addition to using your business plan to attract carriers to do business with you, it will provide the basis for your finance proposal, which is the document submitted to the financial community in order to get funding to start (or expand) your agency.

The information below was taken from the U.S. Small Business Administration. The content is generic to starting most small businesses and some suggestions may not be pertinent to your situation.

Part 1 - Business Plan Executive Summary

The executive summary is Part 1 of the business plan and is the most important section of your plan. It provides a concise overview of the entire plan, along with a history of your company. This section tells your reader where your company is and where you want to take it. It's the first thing your readers see; therefore, it is the thing that will either grab their interest and make them want to keep reading or make them want to put it down and forget about it. More than anything else, this section is important because it tells the reader why you think your business idea will be successful.

The executive summary should be the last section you write. After you've worked out all the details of your plan, you'll be in a better position to summarize it--and it should be a summary (for example, no more than four pages in length).

Contents of the Executive Summary

The Mission Statement -- The mission statement briefly explains the thrust of your business. It could be two words, two sentences, a paragraph, or even a single image. It should be as direct and focused as possible, and it should leave the reader with a clear picture of what your business is all about.

  • Date the business began

  • Names of the founders and the functions they perform

  • Number of employees

  • Location of the business and any branches or subsidiaries

  • Description of plant or facilities

  • Products manufactured/services rendered

  • Banking relationships and information regarding current investors

  • Summary of company growth including financial or market highlights (for example, your company doubled its worth in a 12-month period; you became the first company in your industry to provide a certain service)

  • Summary of management's future plans.

With the exception of the Mission Statement, all of the information in the Executive Summary should be highlighted in a brief, even bulleted, fashion. Remember, these facts are laid out in-depth within the plan itself.

If you're just starting a business, you won't have a lot of information to plug into the areas mentioned above. Instead, focus on your experience and background as well as the decisions that led you to start this particular enterprise. Include information about the problems your target market has and what solutions you provide. Show how the expertise you have will allow you to make significant inroads into the market. Tell your reader what you're going to do differently or better. Convince the reader that there is a need for your service or product, then go ahead and address your (the company's) future plans.

To assist the reader in locating specific sections in your business plan, include a table of contents directly following the executive summary. Make sure that the content titles are very broad; in other words, avoid detailed descriptions in your table of contents.


Part 2 -Market Analysis

The market analysis section is Part 2 of the business plan. This section should illustrate your knowledge about the particular industry your business is in. It should also present general highlights and conclusions of any marketing research data you have collected; however, the specific details of your marketing research studies should be moved to the appendix section of your business plan.

This section should include: an industry description and outlook, target market information, market test results, lead times, and an evaluation of your competition.

Industry Description and Outlook

This overview section should include: a description of your primary industry, the current size of the industry as well as its historic growth rate, trends and characteristics related to the industry as a whole (i.e., What life cycle stage is the industry in? What is its projected growth rate?), and the major customer groups within the industry (i.e., businesses, governments, consumers, etc).

Identifying Your Target Market

Your target market is simply the market (or group of customers) that you want to target (or focus on and sell to). When you are defining your target market, it is important to narrow it to a manageable size. Many businesses make the mistake of trying to be everything to everybody. Often times, this philosophy leads to failure.

In this section, you should gather information which identifies the following:

  • Distinguishing characteristics of the major/primary market you are targeting. This section might include information about the critical needs of your potential customers, the degree to which those needs are (or are not) currently being met, and the demographics of the group. It would also include the geographic location of your target market, the identification of the major decision-makers, and any seasonal or cyclical trends which may impact the industry or your business.

  • Size of the primary target market. Here, you would need to know the number of potential customers in your primary market, the number of annual purchases they make in products or services similar to your own, the geographic area they reside in, and the forecasted market growth for this group.

  • The extent to which you feel you will be able to gain market share and the reasons why. In this research, you would determine the market share percentage and number of customers you expect to obtain in a defined geographic area. You would also outline the logic you used to develop these estimates.

  • Your pricing and gross margin targets. Here, you would define the levels of your pricing, your gross margin levels, and any discount structures that you plan to set up for your business, such as volume/bulk discounts or prompt payment discounts.

  • Resources for finding information related to your target market. These resources might include directories, trade association publications, and government documents.

  • Media you will use to reach your target audience. These might include publications, radio or television broadcasts, or any other type of credible source that may have influence with your target market.

  • Purchasing cycle of your potential customers. You will need to identify the needs of your target market, do research to find the solutions to their needs, evaluate the solutions you come up with, and finally, identify who actually has the authority to choose the final solution.

  • Trends and potential changes which may impact your primary target market, along with key characteristics of your secondary markets. Just like with your primary target market, you would again want to identify the needs, demographics and the significant trends which will influence your secondary markets in the future.

Market Tests

When you are including information about any of the market tests you have completed for your business plan, be sure to focus only on the results of these tests. Any specific details should be included in the appendix. Market test results might include: the potential customers who were contacted, any information or demonstrations that were given to prospective customers, how important it is to satisfy the target market's needs, and the target market's desire to purchase your business' products or services at varying prices.

Lead Times

Lead time is the amount of time between when a customer places an order and when the product or service is actually delivered. When you are researching this information, determine what your lead time will be for the initial order, reorders and volume purchases.

Competitive Analysis

When you are doing a competitive analysis, you need to identify your competition by product line or service as well as by market segment; assess their strengths and weaknesses, determine how important your target market is to your competitors, and identify any barriers which may hinder you as you are entering the market.
Be sure to identify all of your key competitors for each of your products or services. For each key competitor, determine what their market share is, then try to estimate how long it will take before new competitors will enter into the marketplace. In other words, what is your window of opportunity? Finally, identify any indirect or secondary competitors which may have an impact on your business' success.

The strengths of your competitors are also competitive advantages which you, too, can provide. The strengths of your competitors may take many forms, but the most common include:

  • An ability to satisfy customer needs

  • A large share of the market and the consumer awareness that comes with it

  • A good track record and reputation

  • Solid financial resources and the subsequent staying power which that provides

  • Key personnel

Weaknesses are simply the flip side of strengths. In other words, analyze the same areas as you did before to determine what your competitors' weaknesses are. Are they unable to satisfy their customers' needs? Do they have poor market penetration? Is their track record or reputation not up to par? Do they have limited financial resources? Can they not retain good people? All of these can be red flags for any business. If you find weak areas in your competition, be sure to find out why they are having problems. This way, you can avoid the same mistakes they have made.

If your target market is not important to your competition, then you will most likely have an open field to run in if your idea is a good one -- at least for a while. However, if the competition is keen for your target market, be prepared to overcome some barriers. Barriers to any market might include:

  • A high investment cost

  • The time it takes to set up your business

  • Changing technology

  • The lack of quality personnel

  • Customer resistance (i.e., long-standing relationships, brand loyalty)

  • Existing patents and trademarks that you can not infringe upon

Regulatory Restrictions

The final area that you should look at as you're researching this section is regulatory restrictions. This includes information related to current customer or governmental regulatory requirements as well as any changes that may be upcoming. Specific details that you need to find out include: the methods for meeting any of the requirements which will affect your business, the timing involved (i.e., How long do you have to comply? When do the requirements go into effect?), and the costs involved.


Part 3 -Company Description

The company description is Part 3 of the business plan. Without going into detail, this section should include a high level look at how all of the different elements of your business fit together. The company description section should include information about the nature of your business as well as list the primary factors that you believe will make your business a success.

When defining the nature of your business (or why you're in business), be sure to list the marketplace needs that you are trying to satisfy. This should include the ways in which you plan to satisfy these needs using your products or services. Finally, list the specific individuals and/or organizations that you have identified as having these needs.

Primary success factors might include a superior ability to satisfy your customers' needs, highly efficient methods of delivering your product or service, outstanding personnel, or a key location. Each of these would give your business a competitive advantage.


Part 4 - Organization & Management

Organization and Management is Part 4 of the business plan. This section should include: your company's organizational structure, details about the ownership of your company, profiles of your management team, and the qualifications of your board of directors.

Who does what in your business? What is their background and why are you bringing them into the business as board members or employees? What are they responsible for? These may seem like unnecessary questions to answer in a one- or two-person organization, but the people reading your business plan want to know who's in charge, so tell them. Give a detailed description of each division or department and its function.

This section should include who's on the board (if you have an advisory board) and how you intend to keep them there. What kind of salary and benefits package do you have for your people? What incentives are you offering? How about promotions? Reassure your reader that the people you have on staff are more than just names on a letterhead.

Organizational Structure

A simple but effective way to lay out the structure of your company is to create an organizational chart with a narrative description. This will prove that you're leaving nothing to chance, you've thought out exactly who is doing what, and there is someone in charge of every function of your company. Nothing will fall through the cracks, and nothing will be done three or four times over. To a potential investor or employee, that is very important.

Ownership Information

This section should also include the legal structure of your business along with the subsequent ownership information it relates to. Have you incorporated your business? If so, is it a C or S corporation? Or perhaps you have formed a partnership with someone. If so, is it a general or limited partnership? Or maybe you are a sole proprietor.

Important ownership information that should be incorporated into your business plan includes:

  • Names of owners

  • Percentage ownership

  • Extent of involvement with the company

  • Forms of ownership (i.e., common stock, preferred stock, general partner, limited partner)

  • Outstanding equity equivalents (i.e., options, warrants, convertible debt)

  • Common stock (i.e., authorized or issued)

Management Profiles

Experts agree that one of the strongest factors for success in any growth company is the ability and track record of its owner/management team, so let your reader know about the key people in your company and their backgrounds. Provide resumes that include the following information:

  • Name

  • Position (include brief position description along with primary duties)

  • Primary responsibilities and authority

  • Education

  • Unique experience and skills

  • Prior employment

  • Special skills

  • Past track record

  • Industry recognition

  • Community involvement

  • Number of years with company

  • Compensation basis and levels (make sure these are reasonable -- not too high or too low)

Be sure you quantify achievements (e.g. "Managed a sales force of ten people," "Managed a department of fifteen people," "Increased revenue by 15 percent in the first six months," "Expanded the retail outlets at the rate of two each year," "Improved the customer service as rated by our customers from a 60 percent to a 90 percent rating").

Also highlight how the people surrounding you complement your own skills. If you're just starting out, show how each person's unique experience will contribute to the success of your venture.

Board of Directors' Qualifications

The major benefit of an unpaid advisory board is that it can provide expertise that your company cannot otherwise afford. A list of well-known, successful business owners/managers can go a long way toward enhancing your company's credibility and perception of management expertise.

If you have a board of directors, be sure to gather the following information when developing the outline for your business plan:

  • Names

  • Positions on the board

  • Extent of involvement with company

  • Background

  • Historical and future contribution to the company's success


Part 5 -Marketing & Sales Management

Marketing and Sales Strategies is Part 5 of your business plan. Marketing is the process of creating customers, and customers are the lifeblood of your business. In this section, the first thing you want to do is define your marketing strategy. There is no single way to approach a marketing strategy; your strategy should be part of an ongoing business-evaluation process and unique to your company. However, there are common steps you can follow which will help you think through the direction and tactics you would like to use to drive sales and sustain customer loyalty.

An overall marketing strategy should include four different strategies:

  • A market penetration strategy.

  • A growth strategy. This strategy for building your business might include: an internal strategy such as how to increase your human resources, an acquisition strategy such as buying another business, a franchise strategy for branching out, a horizontal strategy where you would provide the same type of products to different users, or a vertical strategy where you would continue providing the same products but would offer them at different levels of the distribution chain.

  • Channels of distribution strategy. Choices for distribution channels could include original equipment manufacturers (OEMs), an internal sales force, distributors, or retailers.

  • Communication strategy. How are you going to reach your customers? Usually a combination of the following tactics works the best: promotions, advertising, public relations, personal selling, and printed materials such as brochures, catalogs, flyers, etc.

After you have developed a comprehensive marketing strategy, you can then define your sales strategy. This covers how you plan to actually sell your product. Your overall sales strategy should include two primary elements:

  • A sales force strategy. If you are going to have a sales force, do you plan to use internal or independent representatives? How many salespeople will you recruit for your sales force? What type of recruitment strategies will you use? How will you train your sales force? What about compensation for your sales force?

  • Your sales activities. When you are defining your sales strategy, it is important that you break it down into activities. For instance, you need to identify your prospects. Once you have made a list of your prospects, you need to prioritize the contacts, selecting the leads with the highest potential to buy first. Next, identify the number of sales calls you will make over a certain period of time. From there, you need to determine the average number of sales calls you will need to make per sale, the average dollar size per sale, and the average dollar size per vendor.


Part 6 -Service or Product Line

Service or Product Line is Part 6 of your business plan. What are you selling? In this section, describe your service or product, emphasizing the benefits to potential and current customers. For example, don't tell your readers which 89 foods you carry in your "Gourmet to Go" shop. Tell them why busy, two-career couples will prefer shopping in a service-oriented store that records clients' food preferences and caters even the smallest parties on short notice.

Focus on the areas where you have a distinct advantage. Identify the problem in your target market for which your service or product provides a solution. Give the reader hard evidence that people are, or will be, willing to pay for your solution. List your company's services and products and attach any marketing/promotional materials. Provide details regarding suppliers, availability of products/services, and service or product costs. Also include information addressing new services or products which will soon be added to the company's line.

Overall, this section should include:

  • A detailed description of your product or service (from your customers' perspective). You should include information about the specific benefits of your product or service. You should also talk about your product/service's ability to meet consumer needs, any advantages your product has over that of the competition, and the present development stage your product is in (i.e. idea, prototype, etc.).

  • Information related to your product's life cycle. Be sure to include information about where your product or service is in its life cycle, as well as any factors that may influence its cycle in the future.

  • Any copyright, patent, and trade secret information that may be relevant. This should include information related to existing, pending, or anticipated copyright and patent filings along with any key characteristics of your products/services that you cannot obtain a copyright or patent for. This is where you should also incorporate key aspects of your products/services that may be classified as trade secrets. Last, but not least, be sure to add any information pertaining to existing legal agreements, such as nondisclosure or noncompete agreements.

  • Research and development (R&D) activities you are involved in or are planning to be involved in. These would include any in-process or future activities related to the development of new products/services. This section would also include information about what you expect the results of future R&D activities to be. Be sure to analyze the R&D efforts of not only your own business, but also that of others in your industry.


Part 7 -Funding Request

The Funding Request is Part 7 of your business plan. In this section, you will request the amount of funding you will need to start or expand your business. If necessary, you can include different funding scenarios, such as a best and worst case scenarios, but remember that later, in the financial section, you must be able to back up these requests and scenarios with corresponding financial statements.

You will want to include the following in your funding request: your current funding requirement, your future funding requirements over the next five years, how you will use the funds you receive, and any long-range financial strategies that you are planning that would have any type of impact on your funding request. When you are outlining your current and future funding requirements, be sure to include the amount you want now and the amount you want in the future, the time period that each request will cover, the type of funding you would like to have (i.e., equity, debt), and the terms that you would like to have applied.

How you will use your funds is very important to a creditor. Is the funding request for capital expenditures? Working capital? Debt retirement? Acquisitions? Whatever it is, be sure to list it in this section.

Last of all, make sure that you include any strategic information related to your business that may have an impact on your financial situation in the future, such as: going public with your company, having a leveraged buyout, being acquired by another company, the method with which you will service your debt, or whether or not you plan to sell your business in the future. Each of these are extremely important to a future creditor, since they will directly impact your ability to repay your loan(s).


Part 8 -Financials

Financials is Part 8 of your business plan. The financials should be developed after you've analyzed the market and set clear objectives. That's when you can allocate resources efficiently. The following is a list of the critical financial statements to include in your business plan packet.

Historical Financial Data

If you own an established business, you will be requested to supply historical data related to your company's performance. Most creditors request data for the last three to five years, depending on the length of time you have been in business.

The historical financial data you would want to include would be your company's income statements, balance sheets, and cash flow statements for each year you have been in business (usually for up to three to five years). Often creditors are also interested in any collateral that you may have that could be used to ensure your loan, regardless of the stage of your business.

Prospective Financial Data

All businesses, whether startup or growing, will be required to supply prospective financial data. Most of the time, creditors will want to see what you expect your company to be able to do within the next five years. Each year's documents should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, you should supply monthly or quarterly projections. After that, you can stretch it to quarterly and/or yearly projections for years two through five.

Make sure that your projections match your funding requests; creditors will be on the lookout for inconsistencies. It's much better if you catch mistakes before they do. If you have made assumptions in your projections, be sure to summarize what you have assumed. This way, the reader will not be left guessing.

Finally, include a short analysis of your financial information. Include a ratio and trend analysis for all of your financial statements (both historical and prospective). Since pictures speak louder than words, you may want to add graphs of your trend analysis (especially if they are positive).


Part 9 -Appendix

The Appendix is Part 9 of your business plan. This section should be provided to readers on an as-needed basis. In other words, it should not be included with the main body of your business plan. Your plan is your communication tool; as such, it will be seen by a lot of people. Some of the information in the business section you will not want everyone to see, but, specific individuals (such as creditors) may want access to this information in order to make lending decisions. Therefore, it is important to have the appendix within easy reach.

The appendix would include:

  • Credit history (personal & business)

  • Resumes of key managers

  • Product pictures

  • Letters of reference

  • Details of market studies

  • Relevant magazine articles or book references

  • Licenses, permits or patents

  • Legal documents

  • Copies of leases

  • Building permits

  • Contracts

  • List of business consultants, including attorney and accountant

Any copies of your business plan should be controlled; keep a distribution record. This will allow you to update and maintain your business plan on an as-needed basis. Remember, too, that you should include a private placement disclaimer with your business plan if you plan to use it to raise capital.


Source: U.S. Small Business Administration


Market Access Through IA&B

IA&B's Market Options program offers access to several workers' compensation carriers and personal umbrella and home business insurance through RLI. Access to these programs is specifically for our member agencies. Additional market access to personal lines products (Eagle Agency) commercial lines (Big I Markets) is available through the Independent Insurance Agents & Brokers of America for DE and PA agencies. Additional information about each program and an enrollment packet can be accessed here.


Agency Agreement Resources   

You will be required to sign a contract with any carrier prior to representing them and their products. We handle member requests on a broad range of legal and business issues. This includes reviewing agency contracts with carriers. In addition, considerable time is spent advocating on other issues that impact the efficiency and profitability of members’ businesses. This includes proactive negotiation with carriers for changes in their agency-company contracts. Before you sign any carrier's contract, consult our Agency & Company Relations page to see if the contract has already been reviewed by us. If not, forward a copy to the association for a quick analysis.


Company Satisfaction Index   

Before taking on any carrier appointment, first do your homework. What is the carrier's A.M. Best rating? What is their appetite for taking on new agencies - especially start up agencies? Do they have a minimum premium volume commitment?

One quick way to learn about a prospective carrier is to review what your peers have to say. Each year, we conduct a Company Satisfaction Index survey giving members the opportunity to comment - both good and bad - about their carriers.

The survey asks members to share their opinions based upon four key categories of their carrier relationships:

  • Products, Pricing & Underwriting

  • Policy Service & Claims

  • Agency/Company Relationship

  • Technology

The report differentiates the carriers based upon direct premium written (DPW) and the number of states in their footprint. Carriers are divided into one of four groupings:

  • Regional carriers operating in 1-10 states with less than $100 million in direct premium written

  • Regional carriers operating in 1-10 states with more than $100 million in direct premium written

  • Super regional carriers operating in 11 to 34 states

  • National carriers operating in 35 or more states

You can access CSI and an interactive online tool of the annual results here. The online tool allows you to sort the results based upon carrier ranking or by any of the four key categories. You can also view a side-by-side comparison of carriers and an in-depth examination of each carrier’s individual results by question.


Starting an agency - table of contents



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