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Start An Agency

Starting an Agency – New Agency Tool Kit

This toolkit is designed to educate and assist in the process of starting an independent agency, but it is up to you to make it happen. 
Building an agency from scratch is possible. If you're successful, the rewards are considerable, including the ability to call your own shots, a healthy 
return on investment in the form of owner’s equity and the satisfaction of being in a business that protects people and their valuables. On the other 
hand, starting an agency from scratch is challenging.

Following is a short list of critical success factors necessary to make it:
  • Capital – While an independent agency is not capital intensive relative to other industries, you can expect to need approximately                                   $40,000 to $50,000 in start-up capital to pay for things such as office space, equipment and furniture, E&O insurance             and marketing; and that doesn’t count resources necessary to live on while you build your customer base.
  • Access to insurance companies – You can get licensed but you can't sell insurance without access to insurance companies and/or managing                 general agents. For property and casualty insurance, most companies are looking for a long-term relationship. Getting an appointment usually        requires, among other things, experience in the business, a track record of successful marketing and selling, a marketing territory                      geographically desirable to the companies and a solid proposed business model.
  • Good sales and administrative skills – Some people have great selling skills and can make great insurance producers. Other people are great at administration and service. Starting an agency from scratch will require both sets of skills until you get large enough to hire others.
  • Thorough technical expertise – Customers are placing their risk management needs in your hands, therefore you need to understand the                  products you're selling. Depending on the lines of business you intend to offer, there are scores of different policy forms and coverage               implications. Add to that the importance of understanding the risk management process itself, and you have a very knowledge-intensive                profession.
If you're still interested, this toolkit will walk you through the steps necessary to get started and provide resources to help you implement the steps                    where possible.

How To Get Started – The Groundwork:

Establish a realistic timeline:
Starting an agency will take time. How long it takes depends on your situation and how much time you have to work on it. It almost always takes                         more time than you think it will. Expect at least six months to arrange financing and two weeks to obtain E&O insurance.

Obtain qualified legal/accountant advice:

It is recommended that you seek advice from legal and accounting professionals. 

They should help you understand the risks, costs and administration involved with

opening a new business. You should also discuss with these professionals the costs and

implications involved if your venture is not successful.

Get an overview of the independent agency system and an introduction to basic insurance knowledge:

 If you have operated your own captive agency, you are ahead of the curve (especially if you were able to establish a book of business outside                                     the captive market). You understand how an agency works and are versed in the technical aspects of insurance contracts; however, for as many                      similarities between owning a captive agency and owning an independent agency, there may be just as many differences.

The Business Plan – Five Things Every Business Plan Should Address

Create the Business Plan

We will not bore you with the “not planning is planning to fail” lecture, but just about every industry relationship you need will require a formal                          business plan. This includes carrier prospects for appointments and E&O insurance providers. The business plan consists of a narrative, resumes                             and several financial worksheets. The five things every business plan should address are: 
  1. People – At its core, the fundamental value of any agency is in the capability of its people to execute its objectives. Therefore, your business                          plan should include information about the people who are responsible to execute it. At a minimum, include resumes on each of the key                        players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities        possessed by each. For start-ups, a lack of a demonstrated track record may inhibit your ability to attract prospective employees, customers                       and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be known in the community and/or                     industry.
  2. The opportunity – A key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire                       customers, including with what products and services and with what advantages over competitors. This section should demonstrate that                            you know who your customer is, what your products and services are and how you will position your products and services to be selected                           over those of your competitors.
  3. The business environment – Your business plan should demonstrate that you have a keen awareness of the external business environment                           in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion                              should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these                         factors is relevant to the operation of your agency.
  4. The risks – Many business plans, especially those that will be used outside the agency to attract other stakeholders, often make the mistake                               of painting only a rosy picture; however, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced.                                 Potential stakeholders, especially prospective carriers, will develop confidence in those agencies that pose the risks and provide strategies                            to resolve them.
The numbers – You need to have realistic expectations of where revenues will come from and when and how cash will be used; furthermore,                       insurance carriers will be interested in growth projections. At a minimum, you should have a start-up budget, a cash flow forecast and a production                forecast.

E&O and Legal Criteria

Meet Legal Criteria

Choose an Entity
There are three broad categories to investigate when determining your business organization: Domestic Profit Corporation, Domestic Limited 
Partnership (LP) , Domestic Limited Liability Company (LLC).   There are three basic steps in starting a licensed business entity in Maine: 

1.      Name Approval     
2.      File with the MA Secretary of State’s Office
3.      Application, Enclosures and Fee
To begin this process and get all of the correct links, you should start at the Bureau of Corporations, Elections and Commissions business entity                     licensing site:

Obtain IRS ID
The IRS requires a Taxpayer Identification Number for all entities. This number is used in the administration of tax laws. If your agency is organized                          as a sole proprietorship, your social security number is your tax identification number. If your agency is organized as a partnership or corporation,                      you are given a Federal Employer Identification Number (FEIN).

Sole Proprietorships
S Corporations
Limited Liability Company (LLC) 

To apply for a FEIN number, please visit the IRS website at:,,id=99336,00.html

Obtain License

In order to operate your business, you need to have a separate individual producer license as well.  (Sole Proprietors do use their individual license                         for the business entity as well however they do have to go through all steps above to create the business).  To see the rules regarding individual                   licensing please visit the Bureau of Insurance’s site at:

To obtain your P&C , LAH or PL individual producer license, you can use MIAA’s educational program.  Information on these licensing programs can                         be found at:

Apply for E&O
Prior to opening your new business, you will need to get errors and omissions coverage.

Since this is a new independent agency, and professional liability policies are on claims-made policy forms, your new E&O policy will have a retroactive                date of the policy inception. In addition, since your agency is new and there is no previous information to reference, the E&O carriers will essentially                      have to underwrite you, as the owner, and your goals for the agency. E&O carriers will require a business plan and resume with all new applications.                   MIAA’s for profit corporation, Agency Assistance is the number one writer of Agent’s E&O in Maine and works with agencies of all sizes, business                 structures and coverage needs.  We have multiple markets and will help you find the best options available to fit your unique agency’s needs as you                    start out and throughout the lifecycle of your agency as it grows and develops. 

1.      What Carrier is Right For You?  Contact Agency Assistance at (207) 623-1875 and speak with Gayle McPherson or email

2.      Your E&O Carrier offers more than a policy and coverage - The two leading markets that provide Agent’s E&O in our state also offer a large range                      of Agency assistance via established E&O Loss Control Websites which have sample agency procedures, sample letters for clients, exposure analysis                 tools & self audit forms.    

Access to Insurance Markets

Secure Market Commitments
Direct appointments with a variety of established carriers that have broad, competitive insurance products to offer is the ideal situation; however,                         they are very hard to come by unless you have at least a three-year track record and a sizable book of business that you will bring to the table right                          off the bat. For most start-ups, market commitments will have to come from a combination of a few possible direct appointments and/or a variety                           of indirect markets such as brokering your business through an already established agency or aggregate of agencies. 

Direct Appointments
Many insurance companies operate through the independent agency system; however, most will only appoint agents who have an established track                 record and/or are located in selected marketing territories.  

Another document that you may find useful is How to Attract a New Company

Broker Business
An already established agency can provide access to their markets.  An agreement must be reached between you and the broker/agent on how business will be transacted as well as a percentage commission structure.    To do this you will have to research agencies in your area and find one that is willing to do this with you.

Market Aggregators
Market aggregators provide assistance to new agents in setting up their first agency office, access to otherwise unattainable markets and niche                    programs, the opportunity to obtain direct company appointments and a chance to share in the network's profitability. In return, these networks                    usually ask agents to pay a percentage of commission, a membership fee, or require them to give up a small stake in the value of the book of                       business built up through the aggregator. Be sure to review the contractual relationship with these entities carefully, especially as they relate to book      ownership, commission or revenue sharing and exit costs. 

d.      MIAA Markets

If you become a member of MIAA, you will have access to additional markets including flood, personal umbrella, and in-home business program. 

e.      Big “I” Markets

If you become a member of MIAA, your membership allows you to access Big “I” Markets, an online access to specialty/niche coverages, program                           business and hard-to-find markets access exclusively for IIABA members. Using proprietary IIABA technology and IIABA’s nationally licensed, wholly                 owned agency—IIAA Agency Administrative Services—IIABA members gain access to available coverage, terms and conditions, applications, a quote                        request platform and policy forms and electronic brochures are efficiently conveyed to and from IIABA member agents and product providers. For                       complete information on Big “I” markets visit:

Agency Management System

Choose an Agency Management System

A fundamental building block for today's successful independent insurance agency is a good agency management system that can provide a                         framework for all the necessary business processes. The most effective independent agencies have maximized the ability to operate as digitally                               as possible, minimizing double entry and moving paper. It is advised that a new agency should not skimp on agency management software since it                             will pay in the long run to operate as electronically as possible.  It is also recommended that when you choose your agency management system                           that you also consider the support offered, training and support networks of the system as these often help an agency with the actual use of the                 software.    

MIAA does not endorse any agency management systems, but is aware of the following companies who do business in Maine:

AMS Services, Inc. –

Applied Systems, Inc –


Whether you need staff right off the bat or down the road, recruiting the right talent for the right roles is not easy, especially if you're doing                         everything in the agency yourself. IIABA does offer a career center.                                                                                                                                                                     Visit

Additionally, many companies now use personality testing to ensure they are hiring the right person for the right job.  One such test is called                             Caliper and information on that can be found at and visit member products and services. 


As the saying goes, ‘People do business with people they like and trust’ so networking is highly encouraged.  It is recommended that you join service                   clubs, networking groups and volunteer wherever you can be visible.  It is very important to establish yourself in the location where you plan                                      to do business. 

How the Association Can Help

The association is here to help members succeed. MIAA offers support through education, insurance market placement, technical advice,                             governmental advocacy and agency management support.

·          Agency Membership Application:(

·         Education:  Depending on your level of industry experience or your level of expertise in the various lines of business you intend to offer,                               MIAA offers a broad array of training resources to fit your needs

Market Access through Agency Assistance Corporation

o   RLI Personal Umbrella & In House Business Insurance

o   Liquor Liability

o   Lawyers’ Professional Liability

o   Flood – Personal, Commercial & Excess Coverage

o   Others

Other MIAA Services: