The Rise of Agency Creation: A Prudent Alternative for Insurance and Private Equity Capital Deployment

Finding creative and risk-mitigate strategies to deploy capital has been front and center for our clients. In response, our team has created a turn-key approach to deploy carrier-owned agency models to quickly expand their reach in terms of product and geographic breadth.

POV

Frank Quinn

8/8/20233 min read

The Rise of Agency Creation: A Prudent Alternative for Insurance and Private Equity Capital Deployment

In a world characterized by ever-changing risk dynamics, especially in the property and liability markets, insurance carriers and private equity firms find themselves at the crossroads. The challenge of determining where to invest capital without taking on significant underwriting risk is real and daunting. However, there's an alternative: the creation of Managing General Agents (MGAs) or General Agents (GAs). And that's where FiveM Consulting shines.

Why MGAs or GAs? The Data Speaks:

Uncertain Risk Dynamics: The volatility in property and liability markets underscores the inherent risk of directly taking on underwriting roles. With the increasing number of natural disasters and unpredictable liability claims, underwriting risk can be unpredictable and devastating.

Seasoning Requirements: For firms wanting to enter new lines of business, the initial period is marked by a steep learning curve, significant investments, and regulatory hurdles. Creating an MGA or GA sidesteps these challenges, allowing firms to rapidly enter the market while leveraging the expertise of those who understand it best.

Risk-Free Revenue: One of the standout benefits of the MGA or GA model is the potential for risk-free revenue, dispensing with capital-intensive reserving. Without the burden of underwriting, firms can focus on distribution, relationship-building, and service excellence, translating to consistent and dependable revenue streams.

Low Cost, High Reward: Launching a general agency is relatively low cost. Heavy initial-touch mechanics and structure lay the foundation for continuous fee income with little risk as much of a typical business’s overhead, compensation, is variable and owned by the agents themselves. Launching a general agency has proved to be attractive, even for the largest players. Liberty Mutual announced the launch of Comparion, an agency with a host of partners, in 2021. The agency became fully operational in 2022. Liberty even transferred their exclusive agency team to this new entity.

Competitive Advantage: Carriers already own relationships with distribution partners and policyholders. This presents an incredible advantage over the typical Midwest corporate captive agent looking to strike out on his own. Independent agents own their lead generation which can prove expensive and time-consuming. With the right planning and tactics, carrier-owned agencies are able to use existing relationships to market new products to existing customers on an individual or, better yet, package basis, at a fraction of the cost of other startup agencies. Half of independent agents reported an increased focus on cross-selling in 2022.

Why FiveM Consulting? A Proven Delivery Model:

Our Track Record: The FiveM team has a rich history of establishing agencies. We've spearheaded efforts for carriers looking to expand via agencies and have also been instrumental in creating MGAs to roll out new product lines. Simply put, when it comes to agency creation, we've been there and done that, with excellence.

Our Structured Approach: We've broken down our new agency development process into six components, each tailored to harness our team's individual expertise. This results in a turnkey general agency, delivered in an impressively compressed timeline. Our model spans three phases:

  • Validation, Discovery & Planning: We start with an exhaustive due diligence process, ensuring that the agency model aligns perfectly with your strategic goals and promises healthy returns. If there's uncertainty about the prospects, we'll advise against moving forward, always prioritizing your best interests.

  • Base Implementation: Once we're sure, we swing into action, transforming plans into reality. From liaising with carriers through our vast network to crafting compelling go-to-market strategies, we handle everything. At the end of this phase, you get a full-fledged agency, complete with detailed runbooks and SOPs.

  • Digital Optimization: In an increasingly digital world, an optimal online experience for agents is non-negotiable. We initiate a discovery phase to carve out a digital strategy that aligns seamlessly with your overarching goals.

Six-workstream Approach to Delivery:


Our Commitment Extends Beyond Creation:

After bringing your agency to life, our involvement doesn't necessarily end. We're here to provide continued support, serving as your managed service partner, until you're ready to independently steer your agency towards greater heights.

As the landscape of risk continues to evolve, insurance carriers and private equity firms have a golden opportunity to redefine their investment strategies. By leaning into the creation of MGAs or GAs, and by partnering with seasoned experts like FiveM Consulting, firms can position themselves for a future marked by growth, innovation, and sustainable success.

Reach out to us to learn more about the MGA opportunity for your firm.