How to become an insurance agent
This article will cover all steps of how to become an insurance agent. As a result, it will cover all steps involved to become an agent and how to succeed in the business. Additionally, it will cover the various types of insurance agents including captive agents, independent agents and agency owners to name a few. Insurance can be a very profitable business but it is not easy. If it was, everyone would be doing it. It takes hard work to start and stay in the insurance business.
This article is based on my experience as a sales person and now an agency owner. I have used my personal experience to offer you real examples and advice. Nothing in the list below is hypothetical. My goal is to make things a bit easier for those getting into the business. I have listed a number of mistakes I have made along the way, in hopes you can avoid them and save both time and money.
Note: If your are only looking for access to sales agreements and contract at full street commission or higher click here for contracting.
How to become an insurance agent: Topics
- Insurance license
- Best ways to apply for a license
- Type of license needed
- Taking the test
- Errors and Omissions Insurance
- Why you need it and where to get it
- Different kinds of insurance agents
- Determine which type of agent you will be
- Type of products sold
- How many product types and companies you will sell
- Marketing plan and leads
- Strategies to write business/gain clients
- different types of leads
- Street compensation
- Assigned compensation
- Book of business
- Other topics
- Quote engines
- Back office support
- Application submission/processing
- General Agencies
How to become an insurance agent: Insurance License
The first step in how to become an insurance agent is to have a valid insurance license in the states you will be selling in. You must have a non resident state insurance license in order to sell plans in a non resident state. The requirements vary slightly from state to state. In general, you must pass a pre-licensing exam. Once the you pass the pre licensing exam you can take the insurance exam. State regulated testing centers such as, Pro-Metric will administer the Insurance exams. After passing the test, the agent can apply for a license through the respective state insurance department. Each state has information on their website with details about taking and passing the exam.
This blog will focus on how to become an insurance agent as a Life, Accident and health agent, which require a Life, Accident and Health License. Other licenses are required for other lines of business such as Property & Casualty, Variable life products and securities.
There are a number of ways to study for the exam. Some individuals like to take a class. Others rely on book study and online classes to prepare. In my opinion, classes are not a good use of money. The most cost effective way to study for a licensing exam is by ordering a book and using the online study questions.
Most states require that you take A pre licensing course. There are a number of vendors that offer the course such as Kaplan. They also offer a good value on the licensing exam study material. I would suggest purchasing the study guide and accessing the online bank of past test questions. You should set up a test date at the specific state testing location. Locations/companies vary by state. An example is Prometric in Connecticut. For more specific information on testing in Connecticut, click for CT testing.
After passing the exam, you can apply for your insurance license. There are fee’s for taking the exam and apply for the license. The amouts depend on the state you are in. Our agency provides reimbursements for new agents getting their insurance license. Click here for more info about exam and license fee reimbursement. Some states will require finger prints on file in order to get the license. Check requirements in your state. Obtaining additional licenses for non resident states is easy. Go to the National Insurance Producer Registry site and apply for the needed states without the need for additional testing.
Note: You can sell some non insurance based products without an insurance license. Examples are Healthshare ministry plans and discount products.
How to become an insurance agent: Errors and Ommissions Insurance (E & O)
E & O insurance is a type of professional liability insurance for insurance agents. In general, E & O helps protects advice and service bases sales people against paying for the full cost of negligence claims made by prospects and clients. Most companies require agents to have E & O insurance in order to get a contract to offer their product. Some companies such as Final Expense carriers will allow agents to become contracted (also called appointed) without E and O. Although, I do not recommend that you do this.
Agents can obtain E & O from a number of companies and agencies such as NAPA. Crowe and Associates offers E & O insurance to our producers for $300 a year. Click to learn more about Crowe and associates E and O There are many details an agent should be aware of when it comes to E and O insurance. To learn more about E and O click here
How to become an insurance agent: Different types of insurance agents
There are different types of insurance agents. While I favor the independent model, there are advantages and disadvantages to each. We will cover the basics here:
Internal Sales agent: An internal sales agent (in house agent) is usually an employee of the insurance carrier. They are often set up as a w-2 employee with a base salary and ability to earn bonuses. The number of in house agents has declined substantially over the last 15 years but a number of companies still use them. The advantages for an in house agent are a steady income, company benefits, internal sales support (although this can vary by company) and potential for leads provided by the carrier.
The disadvantages are the potential to have your position eliminated, inability to own your book of business and potential renewal income and inability to offer other companies products. One other large potential disadvantage could be lack of compeative products in the market. If the insurance carrier is not competative, it will make the internal sales persons job virtually impossible.
Captive Sales agent: A captive sales agent is someone that works for one organization or company. They may work as a w-2 employee but often times they are set up as a 1099 general contractor. A captive agent is only able to sell/offer the products that his/her organization authorizes. Some captives can only sell one company while other can offer a number of companies. Captive agents are usually provided sales support and work with a mentor agent. They can also benefit from having access to a brick and mortar office they can go to on a daily basis. Some captive agencies will provide leads to the agent in order to help them make more sales. Captive agents usually do not own their own book of business and are paid a reduced commission.
Independent agent/broker: Independent agents/brokers are general contractors that have individual agreements with insurance companies to offer their products. They have the ability to contract with as many companies as they like. They can also negotiate a much higher commission payout because thy are not giving a portion of the compensation to another organization. Independent agents will usually use FMO’s, IMO’s and general agencies obtain contracts with various companies. The challenges for an independent agent are knowing which companies are most competitive in their area, access to training, leads and office support. Independent brokers are usually paid as a 1099 general contractor.
Note: Our agency offers support to independent agents at absolutely no cost to them. This includes co-op on lead costs, online access to quoting systems, back office support, access to 100’s of products and sales training. Click here to learn more about Crowe and Associates.
How to become an insurance agent: Types of products sold
One of the most important decisions is figuring out which type of products to sell. There are a number of options. To name some of the more popular product types….
Life insurance- Term, Permanent, Whole Life, Mortgage protection
Medicare- Medicare Advantage plans, Medicare supplement plans, part D rx plans, group Medicare plans.
Health insurance- Individual health insurance, group health insurance, Healthshare plans, Dental plans and vision plans
Indemnity based products- Hospital indemnity, Cancer, Critical illness
Long Term Care– Traditional LTC, Hybrid LTC, deposit LTC products
Property & Casualty insurance– Note: You will need a P & C license to sell this type of product. Home, Auto, commercial, professional liability.
Final Expense– (Type of life insurance), simplified issue and guaranteed issue
Disability- Short term, Long Term, Group
The most important part of selecting product types is to select one primary product type that will be your “Lead Product”. From a marketing and prospecting standpoint, it is much easier to choose one main product type to offer/sell. This allows the sales person to focus efforts in one direction. The prospects you meet and sell your main product type to can then be offered the other products by cross selling. I cant stress how important this is. Trying to market a number of products at the same time is gong to lead to lack of focus and stress. Pick on type and develop your marketing plan around it. The other products can be cross sold.
Our agency focuses on Medicare as our main/lead product for a number of reasons. First is the massive number of people turning 65 everyday. The other is people like to talk about Medicare which makes it easier to prospect and get referrals from. Click here to learn more about Medicare sales.
How to become an insurance agent: Marketing and Leads
Marketing will be on of the main keys to succeed in the insurance business. It is hard to sell insurance if you are not getting in front of people in the first place. I cant start to remember how many times an agent told me “I close almost every person I meet with”. Everyone says that because selling is the easy part. The trick is getting in front of them in the first place. The reality is 92% of all insurance agents fail in the business. There are a number of reasons for but one of the biggest is agents not getting in front of prospects. So, how do you get in front of prospects? There are endless ways but few of them are easy. Most successfull agents succeed because they are willing to grind it out and do the hard things most other agents are not willing to do.
When it comes to prospecting ideas, there is a major lack of truely usefull information available. Most websites and articles focus on what to do to sell more instead of how to get in front of people in the first place. It is worth looking at ideas from multiple sources such as this one, click for article on prospecting but the reality is they will not cover everything you need. I have provided a list of the methods I used and continue to use going forward.
How to become an insurance agent: Methods that cost money:
Online leads: No one really likes online leads because they are not fun but they can lead to quick sales. Most online leads are called “shared” leads and are sold to 5-7 agents at the same time. It really comes down to being a better salesman than the other agents calling. Online leads cost money of course and the cost can add up if you are buying volume. To learn more about the ins and outs of online lead sales click here. Here is an example of an online lead company can be found here. Click for online lead company link
Mail response leads: Mail response leads are a common lead type used in insurance sales. Prospects are sent mail responder leads. These small cards are bulk mailed to prospects with a postage paid tear off reply card. When the prospect fills out the card and mails it, you have a sales lead. The cards are usually not very specific and are intended to solicit a response. The true challenge to a mail responder is to get the prospect on the phone and then getting an appointment. Working mail responders is not easy and takes a good deal of practice to have success.
There are two ways to buy mail responders. You can purchase them by the mail batch meaning you are buying batches of 1,000 mailers for a set price. The company will handle everything from the mailer to the list, to processing the responders for a set price. (usually from $380 to $550 per 1,000 mailed). The unknown is the response rate which determines how many lead you will get. You can also purchase mail responders by the responder. Some companies will charge you a set amount per response that comes in (such as $14 to $18 a card). This strategy is a bit more costly but much less risky as you know what you are getting.
Getting the response cards is great but you need to be able to work them effectively to make them pay off. I have included an article on how to work mail responders but take it with a grain of salt given it is from a lead vendor. Click for mail responder article.
Telemarketing: Telemarketing may not be as effective as it once was due to the expansive DNC list in most states. It is easy for you to get a call list that is DNC scrubbed. Many agents call people who are turning 65, because they are prospects for Medicare supplement plans. Do NOT cold call for Medicare Advantage or Part D plans. If you are going to cold call, be sure to call people turning 65 during the next 4 to 12 months. The people who are turning 65 in the next 3 months are already getting hit hard with advertising and calls.
All things considered, I would suggest hiring someone to make the calls for you, so you can focus on closing the sales. Use an in house telemarketer if you possible. If you are using a contracted telemarketing service, make sure they charge you by the appointment instead of by the hour. There is no way to know if they are really calling during the hours you are being billed for.
Seminar selling: Seminar selling is one of the better way to obtain new clients. A lot goes into setting up a seminar and getting people to attend it. If, possible, it is best to work with an insurance carrier to help you with the marketing costs of the event. There are a number of MAPD carriers that have programs in place to help you out with the cost. If you are doing a seminar on your own, make sure you have a solid way to get people to attend.
How to become an Insurance Agent: Compensation
It is important for you to understand how you will be compensated. I have worked with a number of agents who had no idea how they were getting paid or how much. I have also worked with agents that kill themselves trying to get an extra 5% commission. Meanwhile, they do not focus on the most important part which is selling. Generally speaking, you must be aware of your compensation and get paid fairly. By the same token don’t let it consume all your time. At the end of the day, you still need to make sales or none of this matters anyway.
Street commission: Street commission is the commission that an insurance company pays the standard agent they give a contract to. Street commission is, the “going rate” and in most cases you are doing fine as long as you are getting paid “street”. If you are being paid below street, you need to see how much below and what you are getting in return for being paid less. It is important for you to be paid directly from the insurance company and own your own book of business.
I would advise against an LOA (Licensed only agent) or an assigned commission agreement. In these agreements, the agency or upline is paying you the commission and in addition owns your book of business. If you are going into one of these agreements, you should have an attorney look at the contract. You need to be provided with something of value, If you agree either to be paid below street or not to own your own book. Sometimes this is done with companies that offer sales leads to agents at no cost.
Medicare advantage and Part D commissions are reglated in each state by Medicare. As a result, it is very easy to determine the street level commission for these products. CLICK FOR 2017 Mediare Advantage and Part D street compensation It is more difficult to determine street comp for other lines of business such as Medicare Supplements, health and life products.
How to become an insurance agent: Other topics
Quote engines: Online quote engines can give you the ability to quote all type of insurance and compare them. Using a quote platform, eliminates the need for research to find the best plans in any given area. If you are not using an online quote engine, I would highly suggest you start. There are a number of organizations offering them at absolutely no cost and they can quote out and compare just about any plan including Medicare, Final expense, Life, Health, Annuity and LTC.
Back office support: A number of FMO’s/GA’s will offer back office support such as contracting, contact management software quote systems and application processing. They can help an independent agent not only be more efficient but save time as well. Of course it is possible to start up without support but as your book of business grows, you will benefit from getting some help.
General Agencies: In fact, once an agent has some experience, they can start to build their own agency by obtaining GA level contracts. Agents may receive an override on their commission using a GA contract. The override pays in addition to the street comp they get. This allows them to make more money on their own business and also receive an override on any new or existing agents they bring into the business. In order for you to get a GA contract, some companies have requirements that you must meet.
Our organization can help independent agents meet the requirements needed to get GA level contracts and start to build their own general agency. To learn more about becoming a GA click here.
How to become an insurance agent: Other articles and resources
Click for Contracting Kit (can be use to contract with just about any Medicare, life, health, LTC or annuity company) Will also give you access to a free online quote engine.