What should I weigh before buying an insurance agency?

People ask whether an agency is a good investment, and no page can answer that for you. What a page can do is name the things that move the answer. An agency is a bundle of client relationships, carrier agreements and people, and each part can weaken after the sale. Look at them one at a time, in writing, before you form a view.

Renewals and the clients behind them

Ask how many clients stayed from one year to the next, why the ones who left went, and which accounts are large enough to matter alone. A book of long-standing personal clients behaves differently from commercial accounts that are re-marketed often. Request the data by client group so you can see where renewals are steady and where they are not.

Carriers and their contracts

List the carriers the agency places business with and how much sits with each. Ask what the agreements say about a change of owner and whether any carrier must approve you. The seller cannot promise a carrier’s consent. This page on insurer approval covers the question in more detail.

The owner, the producers and the timing of income

Find out who holds the client relationships. If the owner or one producer does, ask what keeps them involved after closing. Ask how and when commissions are paid, and what happens to amounts owing at the closing date. Then ask yourself honestly whether you want to service clients, manage staff or both, because ask what the agency would need from you each day.