If you’re an entrepreneur with an interest in the insurance industry, you’ll want to consider these basics of how to start an insurance company.
Here are the 10 steps you can take to get started on building your very own insurance company.
10 Steps to Launching a New Insurance Company
1. Choose Your Type of Insurance Company
The first step in launching an insurance company is to identify the type of insurance company you want to launch. You might choose from the following types among others:
- Health insurance
- Life insurance
- Property and casualty insurance
2. Name Your Insurance Company
Give your insurance company an identity so people will think of it as a well-known and respected brand. You can take the name of your insurance company from your industry, focus on a geographical location, or use your own name among other options.
The main goal for naming your insurance company is to make it sound appealing and trustworthy so that customers will want to do business with you.
3. Determine Your Insurance Company Business Model
There are several possible types of business models for an insurance company including:
- Online insurance companies
- Brick-and-mortar insurance companies
- Captive insurance companies
- Independent insurance companies
- Telephone insurance companies
No matter which model you choose, make sure that it aligns with your business goals and the products and services you offer.
Read more about choosing the right business model for your insurance company.
4. Choose a Legal Form for Your Business
By incorporating your insurance company, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your insurance company will determine the amount of taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common insurance company business structures.
5. Write an Insurance Company Business Plan
All insurance company owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include information on the company’s products or services, market analysis, financial projections, and management team among other things.
When developing your insurance company business plan and strategy, you should think about the following questions your customers might have:
- What types of insurance do you offer?
- How can I get a quote?
- Are you licensed in my state?
- What are your rates?
- How much coverage do I need?
- What is your claims process?
- Do you have any discounts available?
- What are the terms of your policy?
- When does my policy renew?
- Can I cancel my policy at any time?
- How do I pay my premiums?
- How do I contact you if I have questions about my policy?
- Do you have any reviews or testimonials I can read?
- How long have you been in business?
Answering these types of questions will help you develop a business plan and strategy that meets the needs of your target customers.
Read our article about how to write an insurance company business plan.
6. Apply for the Necessary Permits and Licenses
There may be required licenses and permits you need to obtain before launching your insurance company.
For example, if you will be selling health insurance, you will need to be licensed as a health insurer in your state. If you plan on selling life insurance, you will need to obtain a life insurance license. And, if you want to sell property and casualty insurance, you will need to get a property and casualty license.
You must also register your insurance company as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
7. Determine Your Budget & Apply for Funding as Needed
In developing your insurance company business plan, you will figure out how much funding you need to start and grow your business.
If you have your own funds to invest in your insurance company, you may consider taking advantage of that. In addition to your personal funds, other forms of potential funding for your insurance company include traditional bank loans, SBA loans, credit cards, angel investors and family and friends.
Read our article about the costs associated with starting an insurance company to help you determine if funding is needed.
Read our article about how to fund your insurance company.
8. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your insurance company, it’s essential to have the right technology in place to maximize efficiency. You definitely need a computer with Internet access, and accounting software for tracking expenses and revenues.
You may also want to invest in software specifically for the insurance industry, such as an agency management system. This type of software can help you manage quotes, policies, claims and customer relationships.
Some popular agency management systems used by insurance companies include Applied Epic, Macaw and Jenesis Agency Management System
9. Market Your Insurance Company to Potential Clients
Before you start selling your products and services, you have to let the world know you exist. The first step is to create a website so people can learn more about your products and services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn and Twitter. Also consider networking with other people in the insurance industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute on your promotions strategy, which is your strategy for attracting new customers. Insurance businesses should consider the following promotional strategies for which you should start getting prepared:
- Sponsoring local events and charities
- Offering free quotes and consultations
- Distributing flyers and brochures in local businesses
- Creating a social media presence with engaging content
- Offering discounts to customers who bundle policies
- Sponsoring or participating in community sporting events
- Sending out email newsletters
Read our article about how to market your insurance company for more tips.
10. Get New Clients & Grow Your Business
When you promote your products and services, you’ll start to get interest from potential clients.
Make sure you’re ready to serve these clients. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your insurance company.
Read our article about how to effectively grow your insurance company to learn more.
Starting an Insurance Company FAQs
Starting an insurance company can be a great way to become your own boss and build a business in an industry that you believe has potential. The insurance industry is also ripe for entrepreneurship, as there are many ways to specialize and serve customers in new and innovative ways.
To start a successful insurance company, you need to have a strong understanding of the industry, the products you want to offer, your target market and how to reach them. You also need to have the right financial backing in place and the right technology and software to run your business efficiently. And, finally, you need an effective marketing strategy to attract new clients.
There are many ways you can market your insurance company online. Some of the most effective include, creating a strong social media presence, sponsoring local events and charities, offering free quotes and consultations, and distributing flyers and brochures in local businesses. You can also offer discounts to customers who bundle policies, sponsor or participate in community sporting events, or send out email newsletters.
Some tips for starting an insurance company include:
- Research the market. Make sure you have a strong understanding of the industry, the products you want to offer and your target market.
- Have the right financial backing in place. You’ll need enough capital to get your business off the ground and cover any unexpected costs.
- Choose the right technology and software. You’ll need systems in place to help run your business efficiently and keep track of customer data.
- Develop an effective marketing strategy. Attracting new clients is essential to the success of your business, so make sure you have a plan in place to reach your target market.
- Find and train the right people. Surround yourself with a team of talented and experienced professionals who can help you grow your business.
A simple checklist to use when starting an insurance company is as follows:
- Choose Your Type of Insurance Firm: This should be based on what you are best at and how much experience you have. Remember to keep your interests, skills, and experience in mind at all times.
- Name Your Insurance Company: This should be done with care, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you choose to become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Determine Your Insurance Company Business Model: Determine how your business will make money. Will you sell products, services, or a combination of both?
- Write an Insurance Company Business Plan: Your business plan will also help you determine what your start-up costs will be and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations you will be required to apply for a business license and/or permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on all of your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need to have the right tools in place to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Insurance Company to Potential Clients: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the products and services they truly need.
- Get Clients & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your products and services.
Starting an insurance company can be a rewarding and profitable business venture. By following these simple tips, you’ll be well on your way to opening and running a successful insurance company.