A term commonly used for an agent, broker, or other insurance representative who has responsibility for selling insurance.

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The Advantages of Strategic Advisory Boards
For Agency Owners


As the owner of an insurance agency, there is no legal requirement to have a board of directors. But in these interesting times, the owner of an insurance agency should look at forming a strategic advisory board.

A strategic advisory board is a group of carefully selected insurance experience advisors that assists the agent owner in making important decisions. Unlike a traditional board of directors, a strategic advisory board is comprised of members who have knowledge and expertise in specific areas of the insurance industry. The goal of the strategic advisory board is to reduce the amount of anxiety equated with confronting unexpected situations, and to provide solid, trustworthy business advice to ensure successful and profitable agency planning and execution. By adding substantial value, their cost does not become a burden for the agent owner.

Generally, a strategic advisory board meets on a quarterly basis, allowing for members to keep abreast of the significant issues affecting the insurance agency.

Ideally, your board should be comprised of a minimum of four members with expertise and knowledge in agency growth, carrier relationships, mergers and acquisitions, and legal and tax advice.

Following are examples in each of these four areas where a strategic advisory board may prove helpful.

Agency Growth

• Employment agreements for agency producers – In your agency, you have approached a competing producer trying to persuade her to leave her present position and join your fast growing retail agency. There is one big hurdle: she has a strict “non-compete agreement” that has to be circumvented. You can turn to the expertise of your strategic advisory board and work with its members to come to a solution on hiring the producer, without the problems that a non-compete agreement can give you;

• Forming an agent-owned captive insurance company – Your retail insurance agency has been writing errors and omissions on real estate appraisers with a consistent 25 percent loss ratio, and you want to recapture some of the underwriting profit into your own agent-owned captive insurance company. You require a complete feasibility study, and want to raise the capital for the captive insurance company through a private placement memorandum. The technical task of structuring the feasibility study for the agent-owned captive can be delegated to the strategic advisory board. Should you use Arizona or Vermont, or even Hawaii as your domestic domicile? Do you want to own a Cayman Island agency captive, or Barbados? What are the advantages and disadvantages of each domicile, or shore and offshore? The strategic advisory director has all the answers to let you proceed with this concept to enhance value.

Carrier Relationships

• Negotiating existing insurance carrier agency agreements – Your retail insurance agency has just received the bad news that your largest carrier is leaving the state because of reinsurance costs and insurance product pricing. As the owner of the agency, you turn to your strategic advisory board to come up with a solution to delay the carrier’s withdrawal from the state. In fact, the strategic director would be aware of the carrier withdrawal before it makes the decision to withdraw. Experienced strategic directors know all the signs because they have experienced this before in their younger years. Delaying the withdrawal means commission dollars saved, and value added;

• Finding new insurance company markets – As the owner of a wholesale agency, you have put aside a specific budget for searching for new carriers and even investing in initial public offerings of newly-formed insurance holding companies. The strategic advisory director can help in identifying new insurance carriers that have just received their “A” rating, and are looking to build a new distribution system. This expertise is not with the owner of the agency, whether it be retailer, wholesaler, or managing general agency. The dedication to search out newly-formed insurance companies is an expertise, starting with knowing state insurance department officials. Your strategic advisory director can find new carriers better than you, the owner of the agency, can;

• Interviewing underwriters for your managing general agency – The objectivity of the strategic advisory director makes him suitable for the decision-making process in new hires for your managing general agency. MGA owners can turn to the director for one last interview before making a final decision.

Mergers and Acquisitions

• Unsolicited offers to buy your agency – The unsolicited offer by a bank to buy your managing general agency or wholesaler, or even retailer, should be a sign for you to seek financial representation. Dealing with organizations that have made numerous agency acquisitions puts you, the agency owner, at a disadvantage. The world of “letters of intent,” due diligence, and pro-forma financials makes the agency owner a novice. Turning to your strategic advisory director, who has been around long enough to know what your asking price should be, will give you an edge. It is always an emotional time, and the thought of selling your agency needs careful consideration;

• Accessing capital to grow your agency – For the geographical expansion of your wholesaler, you require additional capital. The strategic advisory board has already approved the expansion expenditure, and now turns to securing capital. Strategic advisory directors have access to expansion capital. The entire process of obtaining expansion capital must be done professionally, and is another area where strategic advisory directors can make a significant contribution.

Legal and Tax Advice

• Selecting an insurance litigation law firm – The number of lawsuits between agents and insurance companies has dramatically increased over the past five years. Interviewing law firms for litigation purposes requires a type of expertise that agent owners do not have. Your strategic advisory board will only be as good as you, the agent owner, want it to be. It will be your responsibility to keep your board informed of situations that affect your agency.

When appointing members, it is important to consider:

• Is this person knowledgeable about this area of expertise in relation to the insurance industry?

• Can this person be trusted with complete confidentiality?

Remember that your strategic advisory board is there to assist you in making the right decisions for the future of your agency.

Andy Barile has over 40 years experience in the property/casualty insurance distribution business. Since 2001, Barile had been associate director to the owner/founder of Harbor Capital Advisors, Inc., Huntington, New York – financial consultants to the insurance industry in mergers and acquisitions, acquisition searches, appraisals, corporate finance, business/strategic planning, new venture consulting, due diligence, and litigation support. Sales have been consummated on behalf of agency owners of retailers, wholesalers and managing general agents. Barile can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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