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Starting An Agency - New Agency Tool Kit...Continued

A printer friendly version is also available by clicking on "Starting an Agency - New Agency Tool Kit" and downloading the pdf. Good luck in your endeavor!

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.

  5. 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

  1. 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 Massachusetts:

    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 Division of Insurance (DOI) business entity licensing site:

  2. 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

  3. 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 Division of Insurance’s site at:

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

  4. 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. MAIA's Number One Insurance Agency is the number one writer of Agent's E&O in MA 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 our E&O Department at (800) 742-6363 and speak with either Ellen or Michelle or email them at or

    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. They also often offer free webinars & podcasts on "hot topics", discounts to outside resources/reference guides and general inquiry services. Contact our E&O Department at (800) 742-6363 and speak with either Ellen or Michelle or email them at or

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.

  1. 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. A list of companies currently operating in Massachusetts can be found at: Massachusetts Licensed Insurance Companies

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

  2. 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.

  3. 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.

  4. MAIA Markets
    If you become a member of MAIA, you are also able to access certain markets for your insured's through the Number One Insurance Agency. Market access through MAIA's Number One Insurance Agency include:
    • Workers' Compensation
    • RLI Personal Umbrella & In House Business Insurance
    • Liquor Liability
    • Lawyers' Professional Liability
    • Flood - Personal, Commercial & Excess Coverage
    • Others

    For a complete listing visit:

  5. Big "I" Markets
    If you become a member of MAIA, your membership also 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, please visit click here.

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.

A list of agency management providers can be found at Automation Vendor List 2016.pdf

Workflow Procedures

Establish Workflow Procedures
In Massachusetts, it is estimated that one in thirteen agents will be involved in an E&O claim. One of the best ways to avoid this potential is to create and develop a written procedures manual. This document should be fluid and adaptable to meet the market and client demands, but should also establish some structured guidelines to enforce the way you want your business handled.


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. MAIA's Job Central is there to help when you're ready.

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


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. MAIA offers support through education, insurance market placement, technical advice, governmental advocacy and agency management support.