Who Owns the Agency?

Not long ago I got to spend the afternoon with a fellow insurance agency owner talking about our business.  He’d been in the agency business quite a bit longer than I have but we shared a lot of the same experiences and challenges. 

He was very interested in getting rid of the company headaches, worrying about production requirements and so forth.  And he was especially intrigued about the possibility of making an extra $50,000 a year on his existing $3 million agency by joining OAA. 

As we finished our meeting he said, “let me visit with my producers and I’ll call you back”!  I asked why, as the agency owner, he needed to discuss something like this with his employees.  That was a bit unusual to say the least.

He told me that his producers all owned their books of business! 

Somewhat taken aback I asked again “you mean all of your production is owned by your producers”?  Sadly, that was the answer the second time.

When I pointed out to my new friend that all he owned was a bunch of used furniture and obsolete computers it was his turn to be stunned.  You see, he’d never stopped to think about what makes an agency valuable. 

Obviously, what gives an insurance agency value is not the furniture, fixtures and equipment (that’s just like the gas in the car when you drive it off the lot) it’s the value of the expirations.  It’s the book.  This fellow was just collecting a salary managing the office!

Over the years I have seen one variation of this or another time and time again.  Perhaps the producers just own part of the book.  Sometimes I see they have rights to purchase it on sale of the agency for way less than a third party would pay.  You may not believe this but we see agencies where there is no producer non piracy agreement in place!  The business is free to be taken by a producer whenever he chooses to leave.  Incredible! 

Someday, all of us will want to retire.  When it’s time to perpetuate the business we worked hard to build, often for decades, who will reap the reward?

Who owns your agency?