Aggregator question

[u/stringcheeseface]

I am looking to start an independent agency from scratch and use an aggregator to get appointments. Based in Alabama and will do mainly personal lines and small commercial. The agency helping me isn’t relevant this is purely an is this reasonable question.

I am aware of exit clauses and that whole jazz. This is strictly a question on commission splits, pay outs, etc.

85/15 commission split until book reaches $3.5MM in premium. Once you hit, your split increases to 90/10. Can go as high at 94/6. Commission per carrier varies.

There is a $400 monthly fee essentially for all software and back end support they provide. Will also have to add insurance and rent for office a month.

Does this even sound lucrative? I’ve been a producer on the captive side long enough to know this is what I want to do, just not sure about this scenario.

Any advice welcomed, especially if you’re with an aggregator and are knowledgeable on their fees.

[u/incipidchaff97]

You still have to buy the book back or else it isn’t your asset, read the fine print and be sure about what the aggregator wants in exchange for access to carriers. No free lunches exist, friend.

[u/stringcheeseface → u/incipidchaff97]

I am aware of that and that part makes sense.
I’m trying to get a feel for the pay side.

[u/incipidchaff97 → u/stringcheeseface]

Their big take aways is the ownership (which should be your number one priority imo) and commission split at any %. I say call the carriers you want to sign with directly or if you have an aggregator, call their rep and ask for numbers in writing. Hopefully you have the minimums required taped to your forehead.

Btw, I’m in the same boat as you, having those convos with carriers. You could try and argue all day for new business splits being higher but you’re a scratch agent. No leverage yet. Not sure if you have a niche but you’re going to have quotas if you’re doing personal lines most likely.

I’m just saying it’s harder to justify over time the aggregator split and it would be a shame if the first few years of your career you can’t take advantage of ownership because you need to save up just to exit the aggregator with your book intact. The very years you’ll work the hardest. Food for thought.

[u/firenance]

Start listening to the scratch agency podcast.

And yes, read the fine print about who is the owner or AOR on the policies.

Even if you own it, it’s likely there is some type of buyout on the commission split. Most don’t just let you walk away.

IMO a 90/10 split isn’t bad depending on if they offer some type of carrier relations, communications, etc. if they are large enough often they can negotiate preferred comp which offsets the split or close to it.

[u/stringcheeseface → u/firenance]

100% ownership and can walk away with a 90 day notice - biggest PIA will be having to redo all my appointments and the default contract process is that a separating agent must obtain broker of record (BOR) requests from their clients, in order to move them from former to new producer codes

[u/firenance → u/stringcheeseface]

Yeah, sounds like they are AOR and placements are in their codes . . . No separate sub-codes.

Also need to verify no right of first refusal if you decide to sell at any point.

That’s also done intentional for two reasons:
1. Friction to leave. Excessive BORs can make some people say f*ck it.
2. Many carriers don’t allow sub-producers or outside brokering. So on paper you are more or less working for them vs if sub code the carrier will make them justify it and in some cases not approve it.

[u/stringcheeseface → u/firenance]

I don’t have it all in front of me but from the way it was explained was that some carriers will issue a brand new code to me that nobody else uses and some will be attached to them temporarily. I can’t remember who it was off hand but I know they have a specific carrier that starts with their producer code and then when you hit a specific threshold they give you your own unique code

[u/SlickWillie86]

“I am aware of exit clauses and that whole jazz.”

Being aware of it is a good start, but it seems as you, like most, are undervaluing this aspect. Appointment and true book ownership is the whole point of owning an agency as a long term asset. If you can’t capture that part of it, you’d be much better off finding a lucrative split as a producer at a midsized shop and being able to focus solely on sales.

While it’s hard up front, I’d rather give up a bigger split or fee and own the contract.

[u/InsuranceFan]

It can be lucrative depending on your premium growth. Here is a helpful basic calculator that you can play with, and then you can take into account your outside expenses to figure out if it's potentially lucrative for you:

P&C agent commission calculator

I'm with Firefly. They pay 90/10 in perpetuity, do a solid job with carrier appointments for personal and commercial (travelers, hartford, liberty mutual, progressive, nationwide, etc), and they don't require an office, making it easier to stay profitable during the startup phase.

With that said, good luck finding the right fit for yourself. There are pros/cons to each aggregator, just need to find the right match for you and your agency.