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Business Planning for Brokers

  • MGA Systems
  • |
  • August 2021
Paper Mache Rocket Taking Off into Outer Space

Brokers are a resourceful group of insurance specialists who move quickly to enter a market or pivot to new, creative opportunities as they arise. While they may have a variety of business models and even titles, they share the same goal of submitting hard-to-place risks to carriers on behalf of retail agents.

Some brokers may start with a retail agency that creates a division to market obscure risks, based on their expertise in that specialty niche market. They often have a strong relationship with a carrier that encourages them to present product offerings for market. Other brokers may start with a carrier that wants to entertain submissions from a single broker, instead of coordinating with multiple retail agencies. As you start a brokerage, whatever your business model, you need a plan for success in this market segment.

A Step-by-Step Guide

STEP ONE: Evaluate the opportunities. Before you jump in with both feet, do some research on the coverages you want to market, and the admitted and non-admitted carriers interested in the risks. Questions to consider:

  • What approach will distinguish your brokerage from your competitors?
  • Why will a retail agent want to do business with you?
  • Can you identify a couple of carrier partners that write your specialties? Do you already have appointments with carriers?
  • Do you have in-house knowledge in this industry? For example, are you comfortable with identifying appropriate coverages for vacant buildings?
  • Do you have a distribution channel of retail agents that will bring you business that they don’t have experience with or can’t place with their carriers?
  • What type of online self-service presence do you want to have?
Types of Brokers
A broker may also be known as a:
Binding Authority MGA
Wholesale Broker
MGA Broker
Wholesale Distributor

STEP TWO: Create a business plan. There are numerous templates and suggested plan formats online. When you Google “business plan,” you will find plan templates and outlines, which will most likely include sections such as:

  • Executive summary to capture attention and provide a concise overview
  • Discussion of the business opportunity you are considering
  • Organizational structure of the brokerage
  • Products and services you plan to market
  • High-level marketing and sales plan including a competitive analysis
  • Financial projection, with start-up and ongoing costs, plus revenue projections
  • Technology that you require to operate efficiently, submit risks to carriers for quotes as well as ensuring commissions are paid quickly and accurately.

STEP THREE: Develop a marketing plan. Even though this is a section of your business plan, you probably also need an expanded, tactical guideline for marketing your ideas. This plan should include information such as:

  • Ways to generate and manage retail agent leads
  • Carriers that you can work with to submit the hard-to-place or unusual business or carriers with whom you already have an appointment
  • Lists of industry events and trade publications that may assist you
  • Plans for creating a website or updating your current website to feature your new offerings
  • Uses of social media to support your marketing efforts.

STEP FOUR: Evaluate staff requirements. Be sure you have the correct team to maintain relationships with agencies, handle account clearance, submit business to carriers, follow up on the submissions, bind the business, as well as generate invoices and commissions.

STEP FIVE: Establish agreements with carrier partners. This agreement will specify the types of coverages you’ll be quoting. For example, you may plan to handle all the hard-to-place workers’ compensation business in your territory. And of course, your carrier agreement will include the commission structure as well as any required carrier-specific underwriting requirements. Carriers want your partnership to streamline submissions to them and generate revenue. They are keenly aware of the importance of brokerages as a distribution channel. It limits the volume of interactions they have with retail agencies and enhances the carriers’ efficiencies. It also brings new business to them.

STEP SIX: Contact retail agencies. As your sales arm, you may need an introduction to new or additional retail agencies. Check out Neilson Marketing (neilsonmarketing.com) to quickly locate candidates handling unusual lines of coverage that may need assistance placing the accounts. These risks may come your way because:

  • Retail agents may not have the expertise with this coverage or market niche, or they don’t have a carrier with which to place the business (a retail agent may not write a pollution consultant very often, for example).
  • It may be business that has a history of high claims frequency or high claims severity (something such as nuclear power plant operators).
  • The business may either have a long history of losses or it may be a new type of business that doesn’t have good loss history statistics (for example, marijuana dispensaries haven’t been around long enough to have reliable, quality loss data).

STEP SEVEN: Identify a technology partner for all your automation needs. Today’s flourishing businesses depend on technology, and insurance is no exception. When you are reviewing automation vendors, look for a system that provides off‑the‑shelf:

  • account clearance
  • quoting
  • submission tracking
  • binding
  • commissions
  • payables and receivables
  • invoicing
  • document management
  • electronic filing and storage
  • event-driven workflows
  • statutory company reporting
  • regulatory compliance

MGA Systems offers a software platform with everything you need to run your brokerage and no investment in components you don’t need. With a cost effective SaaS solution, Insurance Management System (IMS), you have the advantage of all the functionality you need for insurance processing as well as standard office automation tools and valuable cybersecurity protection. We offer a complete automation solution to get you submitting business and generating revenue in days, not weeks or months.

As you take the steps necessary to build a successful brokerage business, MGA Systems’ team of experts is here to talk with you about implementing the tools and technology you need. Please give us a call at (877) 790‑1114 to discover how MGA Systems can provide you with the right-sized solution for all your automation needs.

About The Author

MGA Systems

With more than 150 clients worldwide, the core of MGA Systems’ products include rating, quoting, binding, issuing, accounting, claims, document management and reporting. Understanding the nuances of the MGA, program administrator and carrier market, we modify, customize, and enhance our software to support how you do business. Having been a leader in the insurance ma rketplace for more than 20 years, we combine technology expertise, innovation capabilities and deep domain knowledge. Our feature-rich Insurance Management System (IMS) integrates seamlessly with NetRate, our ISO®-based rating application. Each product is also offered independently to integrate with third-party applications. Visit us at mgasystems.com to learn more about how we can help you unleash your value as an MGA, carrier or program administrator.

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