Independent vs Captive - The Math Of A $1,000,000 Book

Did you know that an independent insurance agent will make over 300% more profit on a $1,000,000 book of business than a captive agent? At Pacific Crest we spend a lot of time talking with captive insurance agents showing them exactly how much money they’ve been throwing away.

The results of these conversations are shocking.

Captive carriers do an amazing job at pulling the wool over your eyes. You are building a “business”. You can retire and leave it to your kids. You’re going to make six figures. We provide name recognition.

Here’s a beer bong you can use to drink the kool aid. Keg stands anyone?

All these things are fine. You should want to make six figures. You should want to build a business. You should want to leave it to your kids. The problem with captive carriers however is that 99.99% of the time, none of this is true.

And the worst part? Your profit margin is paying for this dog and pony show.

Assume you have $1,000/mo in rent. You pay a CSR $3,000/mo. You have an additional $1,000/mo in marketing, utilities, and misc expenses. Check out the math below on how much yearly profit you take home on a $1,000,000 book for an independent vs a captive agent.

Independent Insurance Agent

Premium = $1,000,000

12.5% Commission = $125,000

Rent = -$12,000

CSR = -$36,000

Misc = -$12,000

Profit = $65,000

Captive Insurance Agent

Premium = $1,000,000

8% Commission = $80,000

Rent = -$12,000

CSR = -$36,000

Misc = -$12,000

Profit = $20,000

That’s over a 300% difference, an independent insurance agent will make 3 times more for the same amount of work as a captive agent. If you’re ready to stop throwing away money go check out our Enterprise Agent program and request a consultation. Stop spinning your wheels and get started building a profitable business!

How Do I Pick The Right Independent Insurance Aggregator/Alliance?

Picking the right independent insurance alliance/aggregator is one of the most important decisions you will make when starting a new independent insurance agency. It literally will be the difference between success and failure.

Picking the right aggregator means you will get access to the appointments you need. It means you will receive a compensation structure that allows you to grow. It means you won't find yourself closing your business after struggling for years to try and become profitable.

Here’s an industry insider look on how to compare insurance alliances and what to focus on.

You Will Live Or Die By Your Contract

I can’t tell you how many people we talk to that signed up with an aggregator without fully understanding what is in their contract. Many aggregators are only marginally better than than a captive carrier if you spend a little time actually reading your contract.

What do I mean by this?

The contract doesn’t let you actually own your book of business, only a vested interested. Why start an independent agency if you don’t actually own your assets? Or even worse, the contract will have an appointment non compete clause. This means that if you ever decide to leave the aggregator you can’t get an appointment with the carriers that you have had in the past.

Contract issues like these kill agencies and stunt growth.

You Need Solid Access To Appointments

Some alliance/aggregators don’t have appropriate access to carriers. Some of the time it’s the fault of the carrier that you can’t get an appointment. They aren’t taking on new agents in a certain area, this happens all of the time.

But some aggregators simply don’t have the carriers that you are going to need to become successful. If an aggregator only has 20-50 carriers, it’s probably going to be worth your time to look around at other options. You don’t need to go with the largest aggregator in the world but it needs to be big enough that you wont run into issues acquiring markets.

You Need Fair Commission Splits & Fees

There’s always a catch.

Some aggregators will tell you that they pay out 100% commission! And then their fee’s are $900 a month.

Some aggregators will tell you that there’s no fees! And then they only pay out a 70/30 split on commissions.

Some aggregators will tell you that we pay out 100% commission AND there’s no fees! And then they tell you about the $80k franchise cost and their limited ability to provide carrier appointments.

Very few aggregators are honest about their compensation structure. Make sure to find an aggregator that is willing to have an honest conversation about their commissions and fees.

An Aggregator/Alliance Should Provide Mentorship

When you work with an aggregator you should feel like you are working with a mentor or a partner. The way a “good” aggregator operates, is by making money when you run a successful agency. If the aggregator doesn’t seem like it is invested in your success, it’s probably because it’s not.

A successful aggregator is an organization that is an expert in launching independent insurance agencies.

It should be your partner in the launch of your new business because the aggregator has already launched hundreds of successful agencies. If the aggregator you are working with doesn’t intimately know how to build and scale a successful insurance agency, you’re working with the wrong company.

If you found this article useful give it a share or leave a comment below! If you’re ready to talk about starting an independent insurance agency, go visit our Enterprise Agent Program.

How to Deal With Poor Online Reviews

Recently, one of our independent agents reached out to our alliance about a poor review his insurance agency received on Facebook. He was curious as to how to handle the negative comment that was in plain sight for the world, and his potential clients to see. This particular agent takes a lot of pride in his online presence and wanted to make sure he did the right thing by his agency and more importantly, the upset client.

What’s Going on with Farmers Insurance Agents?

It’s common knowledge that there are A LOT of changes happening in the insurance industry. Different factors are playing into carriers taking on rate and companies cutting commissions. Of course, there are digital companies trying to make a wave, as well. So, what I’m about to say probably isn’t going to be classified as a “breaking news story.”