How to start up your own independent brokerage

If you want ultimate control and are thinking of starting up your own independent brokerage from scratch, you may want to think it through very carefully and not just jump into the deep end with your eyes closed, brokers advised during a CU Live presentation last Thursday.

“There’s no doubt that anyone starting fresh in the industry trying to open their own brokerage would have a lot of difficulty doing that,” said Joseph Carnevale, chairman of the Insurance Brokers Association of Ontario. “Generally speaking, insurers want some sort of track record. They want volume commitments.”

For some insurers, the minimum volume commitment would be to sell $1 million worth of policy premiums right away, observed Linda Dolan, broker principal of Alport Insurance Agencies and president of the Insurance Brokers Association of Canada. “And so you have to have to have built something and then you can go from there.”

Elaborating on Dolan’s point, Aly Kanji, president and CEO of InsureLine, said brokers who want to start their own brokerage would be wise to seek employment at an existing brokerage first, where they can build up their own book of business.

“It is virtually impossible to start a brokerage from scratch today,” Kanji said. “My advice would be start out building a book of business. Work with somebody where you either own your book of business or you have the right to buy it and take it with you. Because if you have that base, it becomes a lot easier to start a brokerage than to try and start from scratch with nothing.”

In the LinkedIn Live presentation, Declarations of (broker) independence, Kanji, Carnevale, Dolan, and Lorie Phair, president of Canadian Broker Network, all agreed a good way to build that first book of business is to offer a niche or specialized service.

“First and foremost, I would say if you want to [start your own brokerage], get yourself a niche,” Carnevale recommended. “That’s the best place to be able to develop a following of loyal clients.”

Offering innovative digital insurance products and services provides another opportunity for brokers to establish a foundation for starting up a new brokerage, Phair said.

“I’ve seen some startup brokers that are doing things differently,” Phair said. “Let’s go with digital — they offered new digital platforms starting from Ground Zero. And because they’re different, it attracted interest from at least three main insurance companies that you would all know.

“I think when we talk about startup brokers, we tend to go with what’s been the traditional [start-up] — personal lines, and then we add on small business. Absolutely, specialization is a great way to build up a good book of consumers, customers that follow you because you understand their business and certainly can impact it. But I’ve seen some interesting things on the digital technology side, which is intriguing to insurance companies. It’s just it’s just doing it differently, I think, new ideas.”

Related: Fifty shades of broker independence

Carnevale believes it’s important for brokers wanting to own their own brokerage to take a hard look at themselves. While it may appear glamorous to own your own independent brokerage — making decisions about markets, underwriting, and business lines to offer — being in the weeds of the brokerage’s everyday operations and administration may not be what they bargained for.

“[I’ve heard] brokerage owners I have come across over the last four years tell me: ‘You know, I really love this business. I’m really tired of having to look for staff all the time. I’m tired of handling HR. I’m tired of handling my technology needs. Let me just be somewhere where someone can do all of that for me and I can just go out and sell and do relationships.’

“So, I think before someone wants to jump into owning and running a brokerage, consider if that’s really what you’re looking for. If it is, fantastic. If it isn’t, and you’re just really looking to have that control that we’ve been talking about, maybe there are other ways of doing that without having to do all the little things that you may not really want to do in the end….

“[The brokerage owners I’ve talked to] know what they like to do, and know what they don’t like to do, and they make sure they align themselves with someone who can do the stuff they don’t want to do.”

Feature image courtesy of iStock.com/Dilok Klaisataporn