So you want to be a General Insurance Authorised Representative
Whilst pondering this week for a suitable topic to write an article on I realised that it’s been just over 2 and a half years since I left stable employment in search of greener pastures. That’s when I took the leap of faith into the unknown and decided to start my own insurance brokerage business. The timing wasn’t great, but I suppose there’s never going to be the perfect time to embark on so much risk. I thought in this article I would share some of my journey in business and hope to give some insight to those contemplating doing the same.
First things first becoming an AR isn’t for everyone and perhaps it’s best to consider the alternatives before I explain why I chose to take the path I did. At some point in a motivated insurance brokers career they’ll look around and have a lightbulb moment. They’ll realise they can either continue working on wages their whole career to earn a nice pat on the back at the end of their working life. Or they will identify that potentially they want a greater legacy or most certainly equity at the end of their career. For those that do decide the later option there’s really 2 main paths. You can either buy in to your existing brokerage (incumbent owners permitting) or you can leave and start a business from scratch. I realise there’s other models and multiple hybrid variations of these 2 methods. But, for the most part these are the 2 main paths.
Pro’s with buying into your existing firm could include comfort, knowledge of purchase, and safety of salary. And Con’s could include blindness to outside opportunities, obtaining debt, or even paying for someone else’s problems. There will be other advantages and disadvantages as well, but these are often the thoughts going through the minds of people considering this path.
Now lets say you look into the alternative and you decide you want to start a new business, brand and identity from scratch. This is a realistic option due to the vast amounts of AR networks screaming out for more and more brokers to join their licence. Beware this is far from easy, and anyone that says otherwise is either lying or not a representation of the majority.
Pro’s of becoming an authorised rep include ease of set up. AR networks nowadays have made it a really simple process to progress from setting up a company through to being able to legally sell your first policy. This has evolved to such a fine art that rarely do you hear of people applying for their own financial services licence anymore. They also now offer strength in numbers and access to insurers and underwriting agencies that in isolation you would be unable to obtain an agency agreement with. Furthermore it’s now fairly common that they offer back office processing and claims support, whilst just being general supporters and business advisors to your new venture.
Con’s – well if you’re picking up my biased tone you’ll note there’s not many. The obvious elephant in the room is the share of income. I know there’s some funky unique models getting around at the moment, but lets say on average you can expect to give away between 10%-20% of your income generated in exchange for all the Pro’s listed above.
In hindsight and with a fair amount of reflection I wish someone had challenged me with the following points prior to making my decision to forge my own brokerage business:
Be very conservative when it comes to cash flow. This might sound extreme, but can you afford to live and support yourself and/or your family for the next 12 months if no income were to come in? There are ways and means around this so I’m certainly not saying a “No” should stop you in your tracks. But, it definitely should make you come up with a plan. The point I’m trying to reach is plan for the worst, and hope for the best.
Are your previous clients and business networks connected to you, or the firm you are seeking to leave? You need to be really honest with yourself about this question. Because if you’re not it will become apparent very quickly if you make the decision to start your own business and the income you’d planned on following fails to do so.
Stick to your restraint of trade and be wary of lawyers suggesting otherwise. This was something looking back on my journey I really prided myself on. Like most brokerage employees I had a 12 month restraint when I left my former employer. Of course you obtain legal advice and that advice suggested a restraint of that length for an employee wouldn’t be enforceable. Irrespective of the legality my theory was my reputation in the industry is worth much more than the financial benefits of breaching my restraint. So, I patiently waited my time and let me tell you during the quieter months this was really hard to do. My licence holder was very clear on me honouring my restraint and the more I think about it any AR network worth their salt should provide this advice.
There are going to be hard times. You’re not special, the world isn’t against you. If it were easy everyone would be doing it. The hard times I guarantee you 100% will come. There will be days, weeks, or even months especially within your first 12 months where you might generate no income at all. Do NOT, and I repeat Do NOT get discouraged by this. Every AR has been through this. And can I tell you nothing is more motivating to get you off your backside than impending bills without the impending income to match.
What’s going to be your point of difference? Here’s the cold water. General Insurance Broking is really homogenised. When you strip it back most brokers are going to the same markets, often with the same wordings, and getting the same terms. And in a tough market it’s tough for everyone. So how do you differentiate yourself from the competition? Otherwise, how do you expect new customers to come on board? It makes me laugh in broker news publications every broker thinks that “Service” is their differentiator. This is subjective and obviously can’t be the case every time. So put a significant amount of time into having a very clear well thought out tangible explanation to why a customer should choose your new firm over an often established rival.
Now for the unrequested shout out to my licence holder. 2 and a half years ago I knew I wanted a change, but I had no idea on where to even start. I’d heard of Andrew Hinz, but really didn’t know him from a bar of soap. 1 meeting was all it took and I could tell this was going to be the right move for me. I didn’t know it at the time but Shane Risby was just about to join him. Which had I known would’ve made my decision even easier. Between the 2 of them they’ve supported my business journey with the perfect amount of being there when I’ve wanted them to be, and being there when I’ve needed them to be. You only have to look at the growth in their business and AR network to tell they’re doing a lot right.
If you’re thinking about making the leap take some more advice from me. Don’t make a decision based on lowest AR fee alone. Make sure you don’t make a decision without seeking out Andrew or Shane for a chat. And lastly don’t think for a second you can’t do it. Is it a challenge…..yes! But, is it all worth it…..absolutely yes!
This article originally appeared on Norton & Co Blog and has been published here with permission.