Agency Asset Protection

The vast majority of those reading Broker World magazine are owners of, or are value-added contributors to, an insurance agency. As such, you are very familiar with the various insurance planning means of protecting your clients’ assets, and also growing those assets through annuities. However, too often overlooked is protecting the “asset” of your own agency. Very much like the mechanic that fixes his customer’s vehicles before taking the time to fix his own, or the fable of the cobbler’s children who have no shoes. Therefore, this article is primarily about ways to preserve the ongoing value of your agency in the event you are no longer able to personally do so.

Every agency has certain tangible assets, such as furniture, equipment, website, supplies, software, etc. Those types of assets remain even at a time when you are no longer running the business. While sometimes difficult to establish a true value, many of these assets can have an ongoing value to your successor. Because they can be accounted for in the event of a serious disaster, such as a fire, theft, or wind damage, establishing a value for and protecting these types of assets is normal in insurance planning on the property and casualty side. If you do not market P&C products, meet with an experienced agent that does.

However, the most difficult assets in determining a price value are those intangible elements: The value you personally contribute, your staff experience, established contracts, reputation and contacts of the agency, real estate lease, name recognition, and renewal income stream. Other than renewal income and your real estate lease, we often refer to these types of assets as Goodwill. Both tangible and intangible assets establish the value of the agency. Planning for protecting this value is essential!

As your agency grows over time it becomes an ongoing income stream for you and your family. Along the way you have insured the continuance of that revenue through hard work and quality servicing of your client base. So once developed, the next step is to consider succession planning.

When I first entered the insurance industry I did so as a captive agent selling only long term care for one carrier. As such, not having any idea if my new career would become my true calling in life, I did no futuristic planning when I entered the insurance industry. As a result, each of my sales applications were submitted using my name and personal agent number. When I broadened my horizon and decided to add additional products offered to my prospective clients, I never thought twice about the eventual impact of what would happen to my agency income stream in the event I was retired or no longer living.

While some carriers will continue to pay your estate on a residual income basis, even though you are no longer actively marketing their products, two new sectors became an ongoing potential issue for me: Medicare Advantage and Medicare prescription drug plans. These two products require annual recertification to continue to receive residual income. If I became mentally challenged, or deceased, taking those tests was no longer possible. To add to the picture, I had reached the point where Medicare clients had become my top money-maker. It was at this point that I realized my estate would receive very limited value when viewing only my tangible business assets.

Had I initially incorporated my business, most likely as a subchapter S or limited liability corporation, and had submitted my applications using my corporate name and tax number, then my agency would have received ongoing income even if the agency was sold. Even so, that still would not satisfy the requirement to recertify annually unless the transfer of my business occurred with an entity that had an agency representative that did certify. This would have been a possible solution if I had a partner in my agency. But, like so many marketers of insurance products, I eventually had a one-horse stable.

Another option that I gave serious consideration was to locate a firm that would service my existing customers while allowing me to continually market to new clients. The “fun” side of insurance is in landing new clients. Servicing of existing clients is often a very time consuming task with the thought of retaining your ongoing residual income. Any agency depends on a constant flow of new clients while servicing existing clients.

A major factor in considering the thought of having existing clients serviced by another agency was a fear of the service firm literally “stealing” my client information and then converting clients to their book of business. One way to protect yourself from loss of client integrity is to enter a binding contract with the servicing firm preventing this from happening, and doing so prior to sharing any client information.

In addition to referrals, one of the most profitable aspects of having well-serviced existing clients is the opportunity to obtain spin-off sales when you have given them suggestions on how other insurance products could enhance their position. You are giving up this opportunity when using an outside service firm. However, the positive side of an outside servicing option for your Medicare clients in particular is that due to the Annual Election Period for Medicare Advantage and Medicare prescription drug plans, a vast amount of the agency time is not only spent finding the best overall insurance solution for existing clients, but knowing there will be no increase in income in placing the client with another carrier. This is a very time-consuming effort. Even with sophisticated software quoting systems, there is still a lot of time spent in soliciting the right to generate comparative quotes (with first obtaining a signed Scope of Appointment form) and then the follow-up time in presenting those options to the client. Having a licensed agent working for your agency that can do the necessary steps with your clients is one way to eliminate the need for having an outside servicing firm. However, the cost of staffing may exceed the loss in income by having an outside service firm.

The ultimate dilemma for me: (1) Bring aboard a licensed partner knowing that any of my existing personal business residual income would be lost in the event I was unable to remain licensed and certified; (2) sell my book of business and retire; (3) continue selling while turning over the servicing of my clients to yet another outside firm; or, (4) sell my book of business while retaining the right to sell for the agency that acquired my accounts as a Licensed Only Agent (LOA).

Ultimately, knowing that my age would eventually limit my sales and ongoing servicing ability, what I determined to be the best solution was to find another firm that would acquire my book of business while allowing me to continue selling as a LOA for that agency. Other options may fit other agencies better based on your unique needs and goals. In three previous Broker World articles I reviewed that time-consuming and demanding process, as well as the major factors in arriving at my choice of a successor to my business. And, yes, most insurance carriers will allow a transfer of client accounts. However, please note, the process is different with each carrier. With a predicted drawn-out process, always think about the ability of your successor to stay the course while your client base and residual income is in the process of being transferred. At the very least, obtain a formal agreement giving the acquiring agent or entity full rights and obligation to acquire your book of business at a predetermined price, even if you are not yet ready to liquidate (in essence, a future sale giving your estate ongoing income in the event of your death or limiting health condition).

While selling your book of business only satisfies the income stream portion of your agency, it is the most significant segment. Your other tangible assets will always have a ready-made buyer if the price is fairly determined. Other concerns include any property lease obligations, staff severance agreements, file maintenance (Medicare requires verification of client contact information for 10 years), changes to your website, communications with your existing clients about the decision, and more.

The list of what to consider when choosing a successor, transferring the book of business, and grappling with myriad unexpected details, is quite lengthy. A definite need is to let your clients know (in writing) how the transfer of the servicing of their account protects them from your potential unexpected departure from the business. Remember, not all clients have published or current email accounts, and they often do not open their email. Document your departure in the form of a letter via U.S. Mail to all existing clients, preferably with a picture of yourself and your successor as a formal introduction.

My mission in life became apparent when I realized the value of my service to my clients. Upon the sale of my agency and pseudo-retirement, my new mission has become conveying my knowledge by assisting others in a similar situation. If you would like additional ideas on how to best sell your agency, please feel free to get in touch with me. Certainly, I am not going to personally acquire your book of business, but I can help you wade through the multiple steps in determining your potential options. It is important to note that most acquisition firms are not limiting their approach to only Medicare type agencies, so even if you do not have the recertification issues of Medicare, any third-party advice may become valuable in your final decision when it comes to succession planning.

Note: I rarely answer phone calls from numbers I do not recognize. However, I am reliable when you send me a text at 913-909-3749. Now that I am retired the easiest contact method is to send me an email to my personal account:

is a graduate of Wichita State University with a degree in Business Administration, and then earned his MBA from the University of Arizona. A late bloomer to the insurance world, Dean joined with what was then GE Capital Assurance in Overland Park, KS, as a captive agent selling long term care insurance for Genworth in 1999, and after earning the title of Master Agent, broke free of the captive status and served as a consultant to Personalized Brokerage Services in Topeka, KS, when they were developing their LTC Division. For 10 years Dean managed the Senior Products Division of Forrest T. Jones & Company in Kansas City, MO. While serving in this position he quickly understood the need to guide individuals who needed assistance when they became Medicare eligible. This in turn became the major thrust of the division, and thousands of prospective clients were assisted, primarily members of the Missouri Retired Teachers Association. Dean became widely known as “The Medicare Man” throughout the association of more than 25,000 members.

Dean then formed his own agency, Senior Products Insurance, which is now located in Shawnee, KS, and eventually sold his book of business to a firm in Iowa that specializes in managing and servicing insurance clients on behalf of agents. Dean is licensed to market life and health insurance products in 11 states.

Dean and can be reached at, or at Senior Products Insurance, 15729 W. 62nd St., Shawnee, KS 66217. Telephone and text: 913-909-3749. Email: