When does it make sense to get an insurance license?

Question

Jacob Passmore · Answer

Like @Jason Bott mentioned, between the carrier appointments, and E&O insurance cost, not to mention the actual cost of licensing, continuing ed etc. The 10-15% you'd make on commission would be a wash. If you worked for another agency that provided the e&o/carriers etc, then they would likely require/want more production than just a couple of accounts (every firm varies).       I'll also add that it takes a considerable amount of time to understand policies/coverages (it never ends, it's always evolving) 1 bad insurance dealing with a customer of yours, and the commission you gained may not be worth the business you could lose.

Jeff Porter · Answer

Thank you Jason.  Sounds like it may make better sense to shop around for the best quotes on my policies (at renewal time?).  I've had a great relationship with my agent for 25+ years but have never shopped around.  But always wondered if I could be saving money.  In your opinion, what is the best way for a property investor (I also own a pub) to manage insurance costs?

Jason Bott · Answer

@Jeff Porter a few things to consider,

1)  For the most part, it's not easy to get appointed with an insurance carrier.  If you get the ear of one of them, they will require production of $250k-$500k in the first year or 2, otherwise they will pull the contract.

2)  I do not know the exact % in PA, but most states will not allow an agent to keep their license if their own policies represent greater than certain % of all of all of the insurance premium they write.  I think it's 15%-25%.

3)  The insurance carriers will require you to have certain technology in place before licensing, which usually cost several thousands.

4)  You will be required to have an E&O policy to rep any insurance carrier/Broker.  This is $500-$1,000 per year.

5)  Annual licensing is $100-$200 with the state

#1 POINT - If you get all of this done, the insurance carrier you rep may not be the best price in the marketplace.  So if your company charges $50,000 for 100 units, but there is a competing company willing to do it for $30,000, are you going to go with $50,000 to get a check back for $7,500?  Net cost to you $42,000?

Hope this helps.

Jeff Porter · Answer

Great input, thanks!  So you are suggesting checking with local insurance brokers to work under as an agent?  Are some better than others for property insurance or are most companies comparable?  What about working as an agent for a major company like allstate, farmers, liberty mutual ... ?