Do P&C Joint Ventures exist in the real estate space?

[NTO716]

Does anyone have experience with P&C joint ventures with a realtors' agency or similar? We're a real estate concierge service based in Colorado looking to set up a small RESPA-compliant joint venture that would be an independent insurance agency. The options we're considering are the following:

1. Partner with an independent insurance agency that would be happy to set up a joint venture (i.e. a fully separate mini insurance agency) with us.

2. Set up a small insurance agency on our own and hire an agent (who would get a base salary + generous share of commission, though not the full commission they would get if they were entirely independent).

[3. Theoretically we'd be open to doing the same with a large captive but imagine that might be harder to set up as it would have to go through corporate.]

Would be interested to hear if anyone has thoughts on either of these two models/knows of agencies in Colorado that might be open to partnering with us!

 

[marindependent]

I would not spin your wheels setting up your own agency if you have no experience with the industry. I would partner with an existing agency and work out the details.

The close ratio for an experienced agency vs a new agency would likely be incredible in this situation.

Most people have very little idea how difficult home/dwelling/personal liability coverage is to sell and fully understand. Its more than just saving 15% in ten minutes, way more.

In addition is takes quite a bit of time before you will be profitable selling P&C.

 

[fed up]

[3. Theoretically we'd be open to doing the same with a large captive but imagine that might be harder to set up as it would have to go through corporate.]

Most captives would say "NO" to having a side business or a desk in an agency doing other business. Farmers used to have agents rent desks in real estate offices but got away from that somewhere around 2012.
How many homes do you sell each month? Commission on a homeowners policy can range from 8-13%. If they aren't high end properties there is not a bunch of commission generated when a policy is issued. The money in P&C is in renewals. Partner with an independent by sharing sales info to see if a good quote can be generated and get referrals from the insurance side for home sales. Better than setting up your own agency

 

[NTO716]

Thanks for reading, @marindependent and @fed up ! that makes a lot of sense. We'll look into contacting a few independent agents to get the conversation started. When we're at scale we're hoping to do 200 transactions/month or so. I'm aware that's a significant number for real estate but not necessarily for insurance.

We thought about just doing referrals but if we're only getting paid an upfront fee and aren't monetizing the renewals, the incentive for us isn't strong enough (as other posters here note when trying to get referrals from mortgage brokers or realtors!). That's why we were thinking of the possible JV option--we'd partner with an agency that would bring the expertise, while we would provide very warm leads. Does that sound feasible?

 

[fed up]

When we're at scale we're hoping to do 200 transactions/month or so. I'm aware that's a significant number for real estate but not necessarily for insurance.

A large P&C agency could reach those numbers. A $10 million book of business would have approximately 3500-4000 policies in force and could expect 8-10% loss each year in number of policies, which they would hope to offset with new business. 200 transactions per month is shooting for the moon. My last position I was tasked with 25 policies per month from existing customers and had difficulty reaching that number. Covid didn't help but it was still a challenge.

 

[NTO716]

@fed up That's interesting! So basically 150 policies/year would be a pretty reasonable target for one individual contributor under ordinary circumstances. Our pitch would be that:

(i) we would provide very very warm leads and the agent wouldn't have to go hunting for business on their own;
(ii) we would provide a generous base salary but would want to split commissions 30-70 or 40-60 (in that our agent would keep 30-40% of commissions).

Does that sound like it would be worth a good agent's while? We definitely want to come up with something that would be attractive to an excellent agent, although obviously someone wanting to work for us would be prioritizing a good base salary and opportunity to get in on an agency with exponential growth > short term commissions.

 

[fed up]

Who gets the renewal? Generous base would be what? 40% of first commission? Most producers are paid near minimum wage and have to hit a quota before achieving their bonus but then are paid much more than your suggestion of 40%. They dont get renewals. Agents doing all of the work of selling and servicing would want the renewal %

 

[somarco]

@BADTROUT would be a good resource. He used to frequent the forum but haven't seen him in a while.

Here is his LinkedIn profile
https://www.linkedin.com/in/badtrout/

 

[BADTROUT]

@NTO716 I am in Colorado and have some experience with affinity relationships like you are talking about. I have a few agencies in my network that may be interested in something like this, but I think there are quite a few factors to consider prior to getting there... happy to set up a call anytime if you like. I do lean a bit more toward partnership of some sort versus setting up your own but ive seen both scenarios fail, and succeed. The large captive route IMO in theory could work, but i'd say your chances of anybtraction are much slimmer.

 

[marindependent]

@NTO716 just curious - What Percentage of your Clients are you expecting to purchase their personal lines insurance from you?