January 27, 2020

Negotiate Your Insurance Non-Compete: Three Steps to Resign

by Kris Gibson

In Part 1: Understand Misconceptions, I briefly touched on timing and the process of negotiations. In Part 2, we delve in negotiating all the terms you previously agreed to.

What Did I Agree To?

Either a new employer wants to review your non-compete or your current employer upon resignation will kindly remind you of your contract. It’s in those moments you realize that you may have agreed to terms you wish you hadn’t.

    1. Geographic restrictions prohibiting you going to work for a competitor within a radius of say 50 or 100 miles
    2. Restrictions on your ability to work for a competitor at all; at least for a set period of time
    3. An inability to solicit or, in some cases, communicate with clients or prospects
    4. Forced leave or “Garden Leave” periods where you are restricted from working anywhere while remaining on the payroll at your current (soon to be previous) employer for an extended period

Three Steps to Resign & Negotiate at the Same Time

Step One: Assess your agreement BEFORE you resign. You cannot do this alone. I always recommend consulting a local employment attorney. They can provide the best insight into legality and enforceability of your agreement. They’ll know legal precedents and state tendencies, and with that knowledge, can help you determine what legal leverage you may have.

Step Two: Receive support from your new employer WHEN you resign. With knowledge of your agreement’s legal merit, together you and the new agency can determine the best course of action. You can even discuss multiples and break down your current book into Take or Leave categories. Just make sure not to violate your non-compete by including client names. This violates your current contract.

  • Is there something in your contract that you need removed? If so, be prepared to give and get so both parties feel like they’ve made concessions.

Step Three: Start negotiating IMMEDIATELY. After the words, “I’m resigning,” leaves your lips, start negotiating. Hopefully the conversation is cordial, but if not, you’ve already run down all the scenarios with your new agency. Knowing your audience is key.

  • How has your employer handled these cases in the past?
  • Have they set a precedent there?
  • Are they going to make a sound business decision (you hope so, these people are far easier to reach a deal with)?
  • Are they more inclined to be spiteful than intelligent (not ideal, but also not the end of the world)?

When you assess your opponent, for lack of a better word, you can strategize to win this negotiation.

One Producer's Negotiation Success Story

In 11+ years of recruiting, I’ve helped a ton of insurance professionals negotiate their non-competes. One producer stands out for a lot of reasons. I think his story will help you go through this same process.

The candidate was a Senior Commercial Lines Producer for an insurance agency in Chicago. After 25 years in the business and a 10+ years with his current firm, he was frustrated and decided it was time to make a move. His book was $1MM in revenue comprised of upper middle market and risk management accounts. He was friends with his clients. He vacationed with them. He had the very reasonable expectation that his clients would follow him to a new agency. The problem was his non-compete looked to be rock solid.

After receiving a new offer from a competing regional brokerage, just a stone’s throw from his current firm, he walked into the president’s office and resigned.  Stunned to say the least, his boss tried to persuade him to stay but the candidate’s mind was made up. Right there he pivoted the conversation to negotiating his book of business. He said plainly that he wanted to take the book with him. Well, he wanted to take certain clients. The president’s first response was “No”, but as they talked the producer said three things.

  • He didn’t necessarily need all his accounts to come. They could split the book and find middle ground.
  • His new employer was prepared to pay a nice multiple, 1.5x revenue, to secure X number of key accounts.
  • He gently reminded his employer this is the best deal for everyone. Without him around the clients cannot be retained. This is a win, win, win for the accounts, the president and the producer.

In Part 3: Negotiate Before You Sign, we’ll look at what you can negotiate with a new agency employer.


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