Business Advice

Succession Planning

Episode Summary

Nick and Josh begin the podcast by stressing the importance of succession planning for insurance agents. They explain that many agents pour their lives into building up their books of business, but don't consider what would happen if they unexpectedly passed away, wanted to retire, or became disabled. Without proper planning, an agent's book of clients could be left in limbo.

That's why the first step is structuring your agency intelligently. Nick outlines the differences between operating as an individual agent versus establishing a formal business entity like an LLC. He explains that an entity agency can outlive an individual agent. If set up properly, the book of business could theoretically continue operating under new leadership.

Forming an LLC or corporation also separates your personal assets from business debts and liabilities. This protects you and your family from any claims. An entity is much more attractive to potential buyers as well. A book tied to an individual would require complex successor appointments, while an entity's book stays with the business.

Once the agency structure is determined, the next step is obtaining the necessary licensing and insurance. This includes an employer identification number from the IRS, an agency license from your state's Department of Insurance, and errors and omissions (E&O) coverage. Nick and Josh recommend getting an agency E&O policy that covers all sub-agents, not just individual coverage.

The podcast then covers the carrier contracting process for agencies. Options include using portals like InsuranceBay or generating individual links through BrokerLink. Josh provides tips for completing each carrier's appointment process smoothly. A key difference is that UnitedHealthcare allows agencies to use their own numbers, while other carriers still require individual agent numbers when submitting business.

Josh stresses the importance of having a "change of control" form on file with your state DOI. This allows for seamless transfer of licensure if the agency principal passes away or wants to transition leadership. It simplifies the process instead of requiring the new owner to start from scratch.

The hosts conclude by addressing common agent questions about carrier-specific transfer policies. When an agent dies or chooses to retire, each carrier has different requirements for appointing a successor and transferring the book of business. Josh details the procedures for carriers like Cigna, Aetna, UnitedHealthcare, and more. He emphasizes the headache of navigating each one individually.

In summary, the key takeaways are:
- Structuring your agency intelligently from the start makes succession planning much simpler.
- Forming an entity separates business and personal finances and makes your book more transferable.
- Obtaining proper licensing, insurance, and carrier appointments takes time but is crucial.
- Having a "change of control" form on file simplifies ownership changes.
- Carrier transfer policies vary widely, so understand the options for your book.

Proper succession planning ensures your life's work as an agent benefits your family and clients for years to come. This podcast has invaluable tips for structuring your agency strategically for maximum security.


(0:00:05) - Broker Link podcast features a seminar on succession planning and structuring a secure agency
(0:02:55) - Every independent agent should look at creating an entity, identifying a successor
(0:04:12) - Texas insurance code says profits of an insurance agency can be shared
(0:06:52) - Each carrier has different policies and procedures for appointing a successor
(0:08:28) - Cigna Healthspring allows for book of business transfers after an agent dies
(0:20:06) - Humana does not have an agreement to transfer the deceased agent's book of business
(0:23:28) - We're going to take you through the process of setting up an agency
(0:25:09) - There are several ways you can set up an LLC to run your agency
(0:29:14) - When you are setting up an agency or even just starting an LLC
(0:38:45) - Nick: We do have an Eno reimbursement program for individual producers
(0:40:46) - The next step is to begin the contracting process with each of the carriers
(0:48:04) - Do you get to keep your current writing number or is a new one assigned
(0:49:26) - Another question that came in was regarding a transfer from one FMO to another
(0:50:39) - Can you take clients with you when you become an agency
(0:52:12) - Is there a time limit on notifying carriers about a change of principle of agency
(0:55:10) - Legal Zoom or Nolo can help you obtain tax ID only or additional services
(0:56:55) - There's only one principal for an agency, so there are no coprinciples
(0:57:56) - Today we addressed the succession plans for Medicare carriers
(1:00:08) - If a sub-agent uses their own writing number, then that would fulfill the production requirement
(1:01:18) - If an agency is captive and one of its agents passes away,
(1:03:20) - Whether you're an individual agent or an established entity, you have to select a successor

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