7 Steps to Build an Independent Insurance Agency

• April 1, 2026

By Shawn Moynihan

Building an independent property & casualty insurance agency from the ground up, often referred to as a “scratch agency,” requires not just tenacity and carrier contacts, but the mindset that you’re steadfastly committed to the journey of becoming a successful independent insurance agent.

Experienced principals will tell you there are three essential elements to founding an agency: insight, fortitude and decisiveness. Ultimately, it requires a mindset where turning back is no longer an option.

“Starting an agency is not for the weak of soul,” says Tony Martinez, president of Cornerstone Insurance & Financial Group in Gypsum, Colorado. “It takes guts, courage and the fortitude to grind it out even when things don’t seem to be going your way.”

“You almost have to be a little bit insane about your goals and your vision, because it’s way too easy to quit and do something else, especially with all the other opportunities that exist in this industry,” says Jarrad A. “Rod” Powell, principal of Encore Insurance Group in Richmond, Virginia, and host of the “You Should Get A License” YouTube channel and podcast.

“You have to be prepared to persevere no matter what, so you have to ask yourself honestly: Are you willing to sacrifice and suffer for your purpose?” he adds.

Each step in building your agency carries great significance, beginning with your business plan, all the way to when you’re servicing more clients than you can handle. Here are the essential steps and valuable advice from longtime agency principals on how to approach each one.

Step 1: Become Licensed—If You Aren’t Already

“Licensing is the easy part—people overthink it,” says Cyrus Jaffery, founder and CEO of Jaffery Insurance & Financial Services in Omaha, Nebraska. “Don’t treat licensing like the business. It’s just the key to the door. What you do afterward matters more.”

To get licensed, you’ll need to:

• Complete your state’s pre-licensing education exam.
• Pass the P&C licensing exam.
• Apply for your license through your state’s insurance department.
• Get fingerprinted and a background check.
• Maintain continuing education (CE).

You’ll have to complete CE courses to retain your license, typically every two years. If you plan to sell in multiple states, add non-resident licenses later; don’t start there.

Powell recommends taking the test as quickly as possible after you attend or finish the licensing class. “A lot of what’s on the licensing exam is going to be supplemented later through carrier training anyway,” he adds. “I heard a good friend and colleague say it best: ‘First get your license, then get your education.’”

Step 2: Align With a CPA and Form the Business Entity

Experts recommend aligning with a certified public accountant early in your journey to forging an independent agency. “This is hugely underrated,” Jaffery says, adding that a bad CPA could cost you tens of thousands in taxes, bad entity structure and messy books that could scare away both carriers and potential buyers down the road.

His advice: “Find a CPA who already works with other agency owners. Your CPA should help you keep money in your pocket, not just report it. If they don’t proactively talk tax strategy, then it probably isn’t a good fit.”

Finding the right CPA “is mission critical,” says Brian Mahon, founder of Igloo Insurance in Middleton, Pennsylvania. “Look for a specialty in the insurance industry or in small business or entrepreneurial accounting solutions. Check your network, ask for referrals, and meet with a few before signing up for their services.”

Shawn Fitzgerald, founder of Sound Harbor Insurance in Bayshore, New York, and co-host of “The Scratch Agency Podcast,” also recommends finding a CPA by asking respected agency owners whom they trust.

“The right CPA helps you understand the tax implications for our industry specifically,” he says. “They should be thinking strategically, not just entering data once a year.”

You’ll also have to decide whether to do business as either an LLC or an S corp. While this can be a matter of debate, and an important point of discussion with your CPA or attorney, Jaffery recommends starting as an LLC and shifting to an S corp once you’re profitable.

Fitzgerald agrees, adding that once your agency becomes consistently profitable, typically in the $50,000 to $75,000 range, electing S corp status “can create significant tax savings by reducing self-employment taxes. The key is to think ahead and start with the end in mind, so you are prepared to adjust your structure as revenue grows.”

Step 3: Purchase E&O Insurance

Errors & omissions coverage is mandatory. Not only does it help protect you from client lawsuits, but carriers won’t appoint you without it. Budget a few thousand annually for your E&O coverage.

A well-tailored E&O policy can protect agencies against financial ruin caused by negligence claims, errors in coverage advice or failure to perform duties. It covers legal defense costs, settlements and judgments, ensuring that small errors, such as missing a renewal or failing to explain a policy exclusion, do not bankrupt a new, vulnerable business.

“Starting an agency without E&O coverage is simply not an option,” says Amanda Juratovic, Big “I” vice president of E&O operations. “One small mistake early on can have devastating financial consequences, and E&O insurance ensures those missteps don’t derail a new business before it has a chance to grow.”

While the right coverage can literally save your agency, a combination of good intentions and bad documentation will leave you exposed every time to E&O claims.

“One of the biggest advantages of building an agency from the ground up is the ability to establish sound E&O practices before bad habits take hold,” Juratovic says. “Clear procedures, consistent documentation and regular training early on can dramatically reduce exposure later.”

Step 4: Build Your Tech Stack

For new agencies, technology is not just infrastructure, it’s a growth engine. When done right, a well-designed tech stack can supercharge the entrepreneurial journey. It enables founders to focus less on manual tasks and more on selling, relationship-building and strategy.

To start, you will need:

• An agency management system (AMS).
• Comparative raters for P&C.
• A customer relationship management (CRM) and marketing automation system.
• Secure document storage.
• A phone system with recorded lines.

However, agencies must approach this with caution. “More tools do not equal more efficiency,” says Fitzgerald. “The goal of any tech stack should be automation and friction reduction. If it doesn’t save time or drive revenue, it’s overhead.”

“The trap I see new agencies fall into is building a tech stack before they’ve defined the process. Technology should reflect your workflow, not create it. If you automate before you know what good looks like, you’re just scaling chaos faster.”

The agents who get their tech stack right “aren’t asking ‘what tools do I need?’ They’re asking, ‘what outcomes am I trying to create, and what’s the minimum infrastructure to get there?’ That’s a different question, and it leads to very different decisions,” says Moe Latif, vice president of product management at Vertafore.

Powell recommends getting a good CRM system on day one and exploring agency management systems on day two. “Don’t put your focus on spending all your startup capital on technology before you even know what you’ll actually use,” he cautions. “Add on as you go, based on what you truly need to do the job better and make better use of your time.”

“Don’t overbuy. Don’t underthink,” Jaffery says. “The goal is to maximize what you pick. Most insurance agents only use 50% of any technology they own.”

Latif says agencies should define their workflows before investing heavily in automation. “The trap I see new agencies fall into is building a tech stack before they’ve defined the process,” he says. “Technology should reflect your workflow, not create it. If you automate before you know what good looks like, you’re just scaling chaos faster.”

Jaffery has three pieces of advice:

• Find a CRM and AMS that have an open application programming interface (API) so you can connect with other programs more easily. “If you can get both AMS and CRM in one, that’s a bonus,” Jaffery says.
• “Consumers are overwhelmingly telling us that they want to shop online, and they do not want to call and give you info for a quote. So, get your agency showing online and find a way to give those customers a platform to get quotes and make their life easier.”
• Listen to your customers and prospects—they’re telling you how they want to do business with you. “You must get your tech stack ready for your target market, and if your target market is millennials and Gen Zs, which is 60% of the U.S., then you must be visible and easy to work with.”

As agencies grow, founders should also think carefully about building technology in layers and how it will scale, Latif adds. “Practically speaking, think in layers. Get your foundational layer right first: your AMS and your rater. Everything else plugs into that. Don’t try to build every layer at once. Most agencies that end up with bloated, underused stacks tried to solve too many problems before they understood which ones actually mattered.”

Step 5: Develop Your Business Plan and Go-to-Market Plan

First, understand the difference between the two. Your agency business plan should speak to who you are, what you’re building, and the firm’s objectives. “In essence, the business plan lays out your vision, mission and goals from a strategic lens,” Powell says.

Your business plan, Jaffery says, consists of your agency’s:

• Structure.
• Financials.
• Vision.
• Compliance efforts.
• Long-term strategy.

Meanwhile, your go-to-market plan is how you’re going to accomplish your sales goals. “The go-to-market plan is the tactical implementation of your strategy: who you’re targeting, what you’re selling, how you’re positioning, where the business is coming from, and what your execution plan looks like week-to-week,” Powell adds. “When you’re talking to carriers, that distinction matters. A strong vision is great, but they’re ultimately looking for a clear, realistic path to production that fits their appetite.”

“If you’re truly ready, and you’ve done all the work to get far enough to make a move, you have to be ready to ‘burn the ships.’ There can’t be any going back—only going forward, no matter how hard it gets.”

Mahon notes that carriers want a marketing plan that includes the tactics you’ll use to generate business, the niches you’ll target, the types of insurance products you’re looking to write and perhaps even a SWOT analysis illustrating your agency’s strengths, weaknesses, opportunities and threats.

Your go-to-market plan should include your intent to leverage:

• SEO maximization of your Google Business Profile.
• Referral relationships, such as people in real estate, lenders or contractors.
• Commercial niches, such as trades, hospitality and nonprofits.
• Community involvement.
• Paid online search plans.

“Most agencies fail because they write a beautiful business plan and have no real go-to-market execution,” adds Jaffery.

Step 6: Secure Carrier Appointments

This is often the biggest challenge for new agencies. Brand-new independent agents almost never get access to preferred standard carriers, broad personal lines appointments or low minimums with generous underwriting. This is normal; carriers are managing loss ratios, not encouraging entrepreneurship.

Carriers will consider:

• Your experience.
• Your business plan and go-to-market plan.
• Expected premium volume.
• E&O insurance.

The real question isn’t “How do I get appointed by the best carriers?” It’s “How do I get enough access to write business safely while building credibility?”

Fitzgerald says that early on, the focus should be on revenue and reliability, not prestige: “New agency owners need enough carrier access to properly solve client problems and generate consistent cash flow. In most cases, having two to three strong carriers per niche is more than sufficient.”

“You have to have your own credibility, experience, and story as to why it makes sense to appoint your agency,” says Mahon. “Put yourself in the shoes of the carrier rep. They want to understand the key personnel, the agency principal or founders, and their education and experience.”

Mahon adds that he believes industry designations and letters of recommendation are “huge” in the eyes of a carrier appointing a new agency.

Jaffery concurs that, early on, the goals are to build new business and survive. Carriers, he says, “don’t want fluff.” They want answers to three questions:

• How will you generate new business?
• How will you control quality?
• How will you not blow up my loss ratio?

“You want enough carriers to place business responsibly,” he continues. “I would research the top 10 carriers in your state for new business the year before and try to get at least four or five of them right away.”

Further, working with a wholesaler or broker can help an agency expand its product offerings, fill gaps in carrier appointments and better serve clients.

However, explains Carla McGee, assistant vice president, Big “I” Alliance Blue, “agencies must carefully review contract terms—particularly ownership of expirations. Ownership of expirations determines who controls the client records and renewal rights. If an agency places business through a wholesaler and later secures a direct appointment with that same carrier, the agency may want to move the business in-house.”

“Whether that is permitted depends on the contract,” McGee says. “Failing to review this provision could limit the agency’s flexibility and long-term revenue control.”

Fitzgerald says that beyond the numbers, carriers want to see confidence in your operational discipline. A short video walkthrough of your business plan can be a powerful way to separate yourself and demonstrate professionalism.

However, new agencies must be selective with early direct appointments. If a carrier is willing to appoint you early, make sure your minimums are realistic, confirm your termination, book ownership clauses and avoid exclusivity unless you’re competitively compensated for it. Further, don’t apply to too many carriers at once. Rejections stay on record, so be intentional with your applications.

Credibility with carrier reps is built through clean submissions, accurate underwriting information, transparent communication and consistently honoring commitments, says Fitzgerald: “Strong carrier relationships are earned through performance and trust.”

“Confidence plus discipline beats hype every time,” adds Jaffery. “Carriers trust numbers, not ambition. Earn your way up.”

Step 7: Push Forward and Persevere

Most new agency owners underestimate the volume of consistent effort required to build from zero, Fitzgerald explains, who notes that prospecting, follow-up, marketing and retention require repetition.

“The agents who win have a clear vision for where they want the agency to go, protect their time and execute daily,” he says. “Independence is not about freedom. It’s about accountability.”

Powell believes that the biggest mistake new agency owners make is mismanaging expectations. “There probably aren’t lines around the corner to support your business, and just because someone did business with you inside a larger organization doesn’t mean the same will be true when you’re on your own. You’ll have to prove yourself again and again,” he says.

His advice: Focus on building credibility client by client, but also focus on marketing yourself and your expertise. “Best-known beats best,” he says, quoting well-known businessman and author Grant Cardone. “Get your name out there and then deliver on your promises.”

Execution is the most important thing, says Jaffery, who also stresses the importance of consistency and financial discipline, especially in the early stages. “You have to watch your money at the beginning,” he stresses.

“I believe the biggest mistake you can make is giving up,” says Martinez. “Success doesn’t come easy; it comes at a price. You have to have the will to fight against the naysayers, stand up when you get knocked down, and know that your definition of success could be right around the corner. Giving up too soon could be not only your biggest mistake, but also your greatest regret.”

“If you’re truly ready, and you’ve done all the work to get far enough to make a move, you have to be ready to ‘burn the ships,’” he adds. “There can’t be any going back—only going forward, no matter how hard it gets.”

Shawn Moynihan is associate at Aartrijk.