WHEN
DO YOU SELL OR JOIN?
By Sonny DiMeo
Independent Broker Network
January 2010
This is an important question because to ponder. Eventually, we will face this dilemma but will it be a forced situation or done under our terms? Hopefully, the latter. I have seen numerous agencies sell to aggregators for the security of joining a company who has size and strength and can also offer numerous products without the pressure of required production thresholds. It seems like a natural fit but you do give up some freedom. Recently, I was approached by one of these companies who told me that I would realize an additional $100K in contingency just by joining their group. The projection was based on the fact that they receive larger percentages on written premium for contingency compared to smaller agencies. Another issue is the cost to belong to one of these groups. They all have different ways of charging for membership. One company charges $5000 down payment and approximately $500/month plus a small percentage of your earned contingency but they give you full commissions. Another one charges a flat $600/month but receives 25% of the contingency. I am sure there are numerous other ways that these aggregators get paid but you have to consider it when you decide to jump in.
When you join one of these groups, you are usually issued a sub-producer code under their master code. Their corporate office becomes your new boss. Although you may think you don't have production requirements, I have been told by a number of marketing representatives that this is false. Your agency will need to submit a good stream of business or you will either hear from the marketing rep or corporate. Of course, the production requirements are not as steep as if you were a stand alone agency. If your agency wants to start writing with carriers who offer direct appointments, this is one of the quickest and most efficient ways to access them unless you are able to obtain them on your own - not an easy task unless you are writing $50-100K of new business/year.
Most
of the agencies that I have seen sell or join another group have done so because
their agency is no longer producing like they used to and this is their last
stand. If you are thriving, why would you change your current status? When you
look at the cost of joining one of these aggregators and the payoff, what have
you really gained? Yes, you have easier access to markets but with that comes
the pressure of producing for them. If the agency isn't producing now, what is
going to increase production when you join? Just because you can now write for
numerous carriers, this isn't enough to insure success with them. Your agency is
going to have to find a way to guarantee production. If this is the scenario you
want to face, why not remain independent and begin marketing your agency with
the markets you have. If you need a Commerce West Insurance Company appointment,
they are available through a few general agencies including 
.
If you need a Travelers Insurance Company appointment, consider talking to Abram
Interstate. has access to Travelers Insurance and Zurich for commercial workers compensation
products. And if you need non-standard auto insurance products, simply look at
the list of carriers we have on the website and give them a call. I know of a
lead generator that sells non-standard auto leads for $1. That is a great deal.
Use the 
rater and send out numerous quotes to these individuals.
So
before you throw in the towel, realize that your agency can compete with any
size competitor if you take the time to research the available markets. Your
marketing reps will keep you updated on new products or new changes to existing
products if you ask. You know your agency better than anyone. Define your
strengths and where you want to be in the market and research the general
agencies who offer what you need. Do you subscribe to 
?
It's free to producers and the have a link that you can sign up for at www.mynewmarkets.com.
This website can find you any market you want if it exists and is a shortcut to
doing hours and hours of phone calling. The Insurance Journal is a great source
for product.
I have witnessed a number of producers redefine their agencies focus and have diversified. In this economic environment, you need to lock into a niche and run with it. Concentrate on an underserved class of business and there are many. I don't remember ever hearing about an agency that concentrate just on workers compensation and we all have to purchase this coverage. Why not be the first? Once you have the customer sold on this product, inform them that you also sell GL, BOP, Commercial Auto or any other products you have researched and now master. Most importantly, know all the nuances and coverages of all of these products. Your client needs to believe that you are the undisputed know-it-all in this line of business.
I am often asked of my clients to look at their life and health polices, but I am not licensed in this field. I have my hands full in mastering property and casualty products as it is. I am missing out on residual income but I am okay with that and I refer this business to a company that doesn't compete in my line of business and does not attempt to. Its a healthy co-existence and provides the best price and representation that a consumer can ask for. Attempting to do too much is just as bad as doing too little. Being an independent agent and working for myself is the best situation that I think I can be in so I am not sold on joining a group where I am just another number - even if it means I can not access some direct appointments. I hope to talk to some of these aggregators soon and have them convince me why it would be a good move. Maybe we will have them speak at one of our meetings to get their perspective. There are many ways to compete in this business so don't give up so easily. Do some homework and do some research. You will probably find what you need.