Level Up: Starting an Agency with the Licensed Only Agent (LOA) Model

Starting an Agency with the Licensed Only Agent (LOA) Model

May 3rd, 2021.

Written by John Hockaday and Jeff Sams.

If you have been a successful agent for a few years, you may choose to begin recruiting some fresh agents beneath you.

If you’re going to do it, I’m particularly fond of the Licensed Only Agent (LOA) model.

There is much to contemplate, however, prior to hastily diving into it, you have the potential to become a highly prosperous agency and maintain a compact size – perhaps with a maximum of 10 agents working beneath you.

In this article, we will cover a lot of ground, including the pros and cons of starting an agency, what you should offer in your LOAs to override compensation agreements, and how people’s structure and agreements can influence your exchange.

We are making an effort to gather all of that information in a single location. Additionally, we have conversed with numerous agency proprietors and established our own agency a long time ago, drawing upon four decades of expertise in selling insurance for the senior market.

Interested in expanding your insurance business? Take a look at the other articles in the Level Up blog series.

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What Does LOA Mean In Senior Market Insurance Sales?

A Licensed Only Agent (LOA) is an agent who transfers their commissions to another individual or company.

Licensed Only Agent (LOA) definition image

The receiving company or individual will keep a certain percentage of commissions, overriding a called override. The LOA gets a lot more support and training on their own, rather than relying on an agent and structure in the exchange.

The override covers the cost of all the additional worth, without the need to directly pay for any of it. For instance, an LOA could receive amenities such as an office space, a secretary, and a well-maintained website.

Pros and Cons of the Licensed Only Agent (LOA) Model

If you feel like the next natural step is growth, and you are a very successful producer, you can do a lot of production with 10 dedicated agents. The Model LOA is probably the best one for very successful agents who want to bring on a few agents underneath them.

Agents at our local agency have been with us for decades, which makes me believe that we’ve done something right to warrant that. We have made a real impact in our community and have also formed lifelong friendships.

Nevertheless, there are numerous aspects to consider:

  • The stress and accountability of being a proprietor of an agency.
  • How will you retain agents who achieve success and wish to pursue independence?
  • Your visitation agreement.
  • The agreement for compensation and the way you will organize the commissions.
  • Your personal time, finances, and energy are necessary to establish a new agent and make it operational.
  • What benefits do you have to provide agents in return for your override?
  • In the event that they choose to depart, will they have the ability to bring along that portfolio of clients, specifically whether the client base will belong to you or the Letters of Authorization (LOAs)?
  • agency-pros-cons

    There are numerous factors to contemplate before simply diving into the concept of hiring agents.

    Pressure and Responsibility

    I would begin by being truthful with yourself: are you ready for the stress and accountability of being an agency proprietor?

    It’s a great deal of stress, and you experience the burden of it – I recall being unable to sleep at night, I would lie awake pondering whether or not my representatives were earning a livelihood.

    From Sales to Management

    As an agency owner, if you ask yourself, you’re suited for the role. It takes the right person to be good at this. In my opinion, you’re a really great producer, so if you enjoy it, that gig can be challenging.

    It would have been better if they had simply stayed focused on individual production because they detested it, and I observe many individuals attempting it when transitioning from sales to managing agents.

    Continue doing what you excel at, but consider recruiting assistance if you are a highly accomplished producer. Support personnel can assist you with tasks that you find less enjoyable.

    In conclusion, you must possess strong management and coaching abilities to excel in this field.

    Furthermore, if you’re an excellent salesperson, you struggle with the notion that you might be managing all sales on your own. Ultimately, you become a caretaker, which is not your desired outcome.

    We took the first step in thinking seriously about starting an agency, but everyone should be cautious and not take it for granted. That’s my word of caution for anyone thinking about starting an agency.

    Structuring the Compensation Agreement

    If you’re prepared to establish an agency and hire agents, one of the initial aspects to consider is the arrangement of the agent compensation agreement.

    The Commission Split

    Starting from the moment you first join our agency, it is particularly challenging for us to know everything because we make sure to provide all of our agents with the necessary information.

    The structure or split of the commission can truly vary, and you can also be innovative with it. It could be 60/40 – indicating that the LOA receives 60% and the house receives 40%, it could be 70/30, or it could be graduated based on the number of years that the agent has been with you.

    A graduation of commissions can be a logical decision as a new agent typically requires more assistance compared to an experienced agent. As the agent progresses and requires less support, the agency owner can increase their commissions since they are contributing less.

    Graduation of commissions

    Ensuring that you are certain about what you are doing is key to overriding your agent’s justification, but I have seen agents come up with all kinds of commission splits. It is important to be fair for both sides.

    Sometimes, those spreads are identical! Nevertheless, the proprietor of that agency deserves greater recognition compared to the individual who simply provides a contract and instructs you to work remotely if you offer office facilities and administrative assistance.

    It is the responsibility of the agency owner to ensure fairness – there is no secret formula to achieve it. Additionally, when considering the agent’s contribution to the agency, it is important to determine the value they bring and establish clear expectations.

    The Vesting Agreement

    The visitation agreement is also a crucial component to incorporate into your agreement.

    Once the vesting requirements of the company are fulfilled, the agents will keep receiving the commissions they earn. This implies that they become vested from the very first day when they are appointed as independent agents. (For instance, if your commission amount is at least $300/year, you will own your commissions, and some companies consider you vested from the beginning.)

    If they decide to leave the company the following year, they should be aware of the need to know about their vesting arrangement and the commissions that LOA An assigns to them.

    Certain individuals might experience a period of vesting that can extend for as long as 10 years, however, in my view, a duration of around 3 years is the most commonly observed timeframe.

    Once they have finished, you will be able to depart and then receive support and training from the agent that is fair for the entire year, especially in the first year when you may find yourself in a difficult situation. Acquiring an agent is a colossal task. It demands a substantial amount of effort, money, and time, particularly during the initial few years. Hence, it is crucial for you to have a vesting period in your agreement.

    You require that security as a proprietor.

    How to Retain LOAs Once They’re Established

    By venturing out independently, they can potentially earn a higher income. They believe that the agents you foster and instruct may eventually depart, which represents the primary disadvantage of the LOA framework.

    How are you navigating the waters? It’s important to have a game plan upfront before you start. It’s crucial to ensure that agents feel supported and keep them engaged in order to continue their growth.

    It is really important to think about investing a ton of time and money into new agents before sitting down to talk about the topic. It has been a mix of ensuring our own business agents and providing a lot of value, which is important for us.

    Structuring an LOA Contract

    In today’s world, it is crucial to always make sure that anything you leave behind is the best. If you plan to use forward-moving representatives, you will have a template available. Then, I suggest that you consult a lawyer to discuss putting the initial contract together.

    Some things to ensure you include:

  • The visitation contract.
  • The commission division – whether it’s a separation or allocation of commissions.
  • Non-competition determined by a circumference surrounding your enterprise.
  • Who possesses the group of business – the representative or the organization?
  • Vesting Agreement and Commission Split


    If you don’t mind, they can go into the business and compete with you in the next office. Additionally, you can train and educate them quite a bit.

    In your LOA agreement, I’d suggest that you have a radius that they cannot do business within so many miles of you.

    Add a Non-Compete to Your LOA Agreement (1)

    Who Owns the Book of Business?

    If I’m looking from the viewpoint of an agent, I want to know if I own a business or not. If I bring in 100 policyholders, are they the agency’s customers or mine?

    That’s a crucial distinction – if I am the representative, I desire that enterprise to belong to me.

    I believe that the business agent should think about how they can protect what they want to do, own it, and have the right to do so.

    There should exist a purchase agreement. They possess a chunk of profitable enterprise that holds value in case the agent chooses to retire or undergoes a change of mind and decides they are not fond of it.

    That belongs to them, a valuable creation they are constructing. They are unchanging and do not feel inclined to develop. It’s just, and I believe that’s the manner we have always followed.

    Sometimes, the agency doesn’t realize the advantage of taking it late until they sign, and the agent has no idea what they’re signing.

    Begin when they are confirming what they understand do not representatives numerous thus. You do not obtain any benefits of your enterprise, but you can declare they may depart, somewhere else labor and desire to take a break from work you declare you.

    We would never engage in such behavior, but many individuals in this industry do, so please be cautious.

    Value Agency Owners Should Provide to LOAs

    If you’re receiving a portion of commission from an agent, you should be providing something valuable to deserve it.

    Here are a few instances of items you can offer to representatives to ensure fairness for both parties:

  • Office space.
  • Secretarial support.
  • Access to computers, facsimile machines, duplicating machines, a telephone system.
  • Postage.
  • Website.
  • In order to meet and contact individuals, new representatives will frequently provide leads to agency proprietors.
  • If you work with us, an FMO like MedicareCENTER, you will have access to valuable tools and resources such as enrollment and quoting tools, as well as useful software and supplies.
  • Value Agency Owners Should Provide to LOAs (1)

    Being highly appealing, becoming an LOA can be challenging for individuals who lack their own system of support, as it may create difficulties for a new business owner.


    What is the plan for succession in the event the owner wants to bring the agent in? What is the role of the agent who is going to bring the owner to the table? What is the role of the agent who is going to bring the owner to the table? It is crucial to have a clear understanding of the expectations on both sides when starting an agency with the licensed agent only (LOA Model).

    I think if you don’t consider this, you’ll end up losing all the agents you bring on. I never wanted a person to feel like they could never grow once they came on.

    We’re happy to assist in any way possible; we’re more than willing to offer our support. However, it’s important to note that we don’t provide consulting services for this particular subject, and we don’t possess any standardized templates. I had high expectations for this to be beneficial.

    Good selling!

    Additional articles in the Level Up series for agents seeking to establish their own agency:

  • Level Up: How to Begin Establishing an Insurance Agency.

  • Articles in the Cover Your Bases series for proprietors of agencies:.

  • Cover All Your Ground: How to Establish Significant Objectives for Your Insurance Firm.

  • Cover All Your Ground: Ways to Enhance Efficiency In Your Insurance Firm.

  • Cover Your Bases: How to Utilize LinkedIn for Recruiting Agents.