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7 Essential Tips For Starting an Insurance Company

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In 2016, Americans collectively spent a whopping $1.1 trillion on insurance premiums.

Do you want to earn a piece of this pie? Read on, because we’re telling you how to do it!

Americans will always need insurance. With the uncertainties of life, one needs to insure their life, health, family, home, and businesses.

Starting an insurance company will not only enable you to make a difference in the lives of thousands or even millions of people, but also afford you the opportunity to turn out nice profits.

So, how do you get the company started?

1. Understand the Insurance Industry

The first step to starting a successful business is to gain an in-depth understanding of the industry you want to enter. You must, for instance, identify the barriers to entry. Who are the competitors and do you stand a chance against them? Is the industry forecast to keep growing through the foreseeable future?

Similarly, starting an insurance company requires you to research the insurance industry in the state you want to set up shop. Ask the following questions:

  • Which are the most popular insurance products?
  • How much money are people spending on these products?
  • What the size of your potential target market?
  • How is the insurance workforce? Is there a shortage of insurance professionals?

2. Gain Industry Experience

It’s one thing to research an industry as an outsider, and it’s quite another to dive in and gain hands-on industry experience.

Look at some of the world’s largest companies. Google wasn’t founded by business graduates -Larry Page and Sergey Brin are educated techies. Thinking of Facebook? Yes, Mark Zuckerberg is a college dropout, but he dropped out studying computer science!

The gist of it all is you stand a greater chance of starting a successful insurance company if you start out as an insurance professional.

Therefore, it helps to pursue an insurance program, get licensed as a broker and then find employment, preferably in a large insurance agency or brokerage. This will enable you to work under the guidance of experienced brokers. You will gain important skills which you will later use to start your own company.

3. Raise Sufficient Capital

It takes about $30,000 to start a small business. You will need roughly this amount to start your insurance company but depending on factors such as location and state’s minimum capital requirements, that amount can rise to well over $3 million.

Of course, the most suitable way to know how much you will need is to draw a detailed business plan. You’ll have a more accurate picture of what you will need to spend in terms of leasing or buying office space, securing appropriate business licenses, hiring and paying staff, purchasing office equipment and whatnot.

Once you have the figure, you need to raise the money.

If you have the full amount idling in your savings account or somewhere, great! But if you don’t have the funds, it’s time to go on a capital-raising spree. You could borrow from friends and family, start a crowdfunding campaign, secure a bank loan or even seek an equity investor.

Unable to raise the capital? You can either start small or join forces with other brokers. Should you go with the latter, be sure to get a lawyer to help you draw a partnership agreement.

4. Choose a Business Structure

A business structure defines the identity of a company. You could choose to start a:

  • Sole proprietorship
  • Partnership – General liability partnership, Limited Liability Partnership
  • Limited liability company (LLC)
  • Corporation

Choosing the right structure is crucial to the success of your insurance company. As a matter of fact, insurance companies are exposed to a lot of risks. As such, you need to settle on a structure that protects you from the company’s liabilities. Most insurance business owners typically start an LLC or a corporation.

5. Register the Company

By this point, you already have the vast majority of startup details well mapped out.

Now is the time to turn those details into a reality, and all you have to do is register the company. Although registration requirements usually vary from state to state, here is a list of what you will need:

  • A business name
  • Physical address
  • Omissions and Errors insurance (You will provide a certificate of coverage)
  • Company formation documents i.e. partnership agreement if your company is a partnership
  • A clear criminal record — Insurance company owners must have a clean criminal record.
  • Your broker license.

6. Set Up Your Business’ Premises

Even though technology is enabling millions of people to do business and buy goods and services online, insurance is still a traditional kind of business. This means you must have a physical address where potential clients can walk in, make inquiries and buy policies.

Ready to set up an office?

Find an ideal location, lease or buy the space, get office furniture and equipment, set up phone and internet lines, and bring on board your first hires. Insurance salespeople are the lifeblood of insurance companies, so be keen to hire experienced ones.

7. Set Up a Company Website

Well, we know we said insurance companies still operate traditionally, but that doesn’t mean you shy away from the digital space. In fact, about 74 percent of insurance buyers use websites to get quotes before taking the step to physically visit an insurance company.

Starting an insurance company involves launching a well-designed website. A website is the digital headquarters of your business, and it’s a great marketing and promotion tool. Look at this medical supplement broker page to see an example of a company using its website to disseminate information.

Besides a website, be sure to hire a social media specialist who will take charge of your company’s presence on Facebook, Twitter, and other social networks.

Starting an Insurance Company: You Can Do It!

Starting an insurance company might seem an impossible task, especially when you factor in the fierce competition in the industry.

But, impossible is nothing to any determined entrepreneur. And if you combine your determination with the tips established in this article, you’ll stand a great chance of launching a high-impact insurance business.

Keep reading our blog for more insurance industry tips, as well as general business advice.