12 Steps on How to Start a Car Insurance Company

The demand for vehicle insurance is high and growing everyday. This is because of an increase in automobile manufacturers and sales. Agents tend to make good money offering motorists policies.

There are a few things you need to start a car insurance company. You need a comprehensive business plan, finance and licensing. Others include marketing and insurance for your company.

Startup is moderately challenging especially securing an operational license. You can consider purchasing an existing agency, focusing on a niche or offer a diverse portfolio.

Things to Consider

• comprehensive business plan
• type of insurance to sell
• finance
• licensing
• marketing
• insurance for your company
• purchasing an existing agency
• focus on a niche
• hire qualified staff
• office location

Challenges

There are many challenges facing the industry. The major one is stiff competition from other firms, limiting growth and weak economy. Others are slow growth and finding qualified staff. They sometimes face an unstable financial market, harsh government polices and natural disasters.

• stiff competition
• limiting growth
• weak economy
• finding qualified staff
• unstable financial market
• harsh government polices
• natural disasters

12 Steps: How to Start a Car Insurance Company

1. Start from Scratch or Franchising

There are three ways to get into the industry, start from scratch, join a franchise or purchase an existing business. They all require huge startup funding regardless of the format.

A franchise would provide support, branding and training. Before buying into an existing firm you need to study their finances carry out due diligence to avoid capital flight or buying into a bad investment.

2. Types of Insurance

It is important knowing the types of insurance to offer clients. Common insurance covers are liability insurance deposit, health risk insurance. We have credit, general, motor, payment protection insurance.

More include workers compensation, lenders mortgage, business owner policy and disability insurance. If your niche is car insurance there are many tailor-made for vehicle owners.

Types

• third party vehicle insurance
• liability insurance deposit
• health risk insurance
• credit insurance
• general insurance
• motor insurance
• payment protection insurance
• compensation
• lenders mortgage
• business owner policy
• disability insurance

3. Legal Documents for Insurance Company

To establish the company you need legal documentation. You need a business plan, certificate of incorporation, memorandum of understanding (MOU).

Others are Non-disclosure agreement, insurance business license, bylaws and employment agreement. Incorporate as a limited liability company. Then get tax identification number and insurance policy.

The legal structure of the business could be partnership, sole proprietor, corporation or Limited Liability Company.

• business plan
• certificate of incorporation
• memorandum of understanding (MOU)
• Non-disclosure agreement
• insurance business license
• bylaws
• employment agreement
• incorporation
• tax identification number

4. Acquire Knowledge

To operate an insurance firm you need knowledge of the industry. Attend a pre-licensing course, state administered exam before filing documentation.

Find out from the department of insurance if the license is specific to a state or transferable. You could get a bachelors degree in insurance, masters or PHD. The firm needs qualified professionals to run the administrative aspect of the business

5. Choose a Name

The company’s identity is tied to the name. You need to choose a corporate sounding name that easily identifies your business. You need to design a logo and establish the type of polices to sell. Don’t forget to choose a good location for the business.

6. Write a Business Plan

The business plan should cover company structure, location, core services. It should identify the customer base, offer unique services and address funding. It should establish key partners, staff qualifications and incorporation.

The plan needs a future projection including a marketing strategy. It needs to focus on obtaining an operational license, risk mitigation protocols.  

The plan should determine the city of operation, location and projected income. Make sure you carry out a survey and feasibility study. Try to identify your competition, products and services they offer.

7. Insure your Business

It is important to get insurance for the business. A good policy to consider is professional liability insurance. There are safety nets such as re-insurance premiums for operators.

8. Funding

You need serious money to fund the business. Cost considerations include getting an operational license, money deposit. Others are rent, office building, staff wages and working capital.

In some countries the firm needs to deposit a pre-determined sum to a financial institution before an operational license is issued. This is to safeguard the customers and ensure transparency.

Approach a commercial bank for long term low interest loans. Other ways to finance the business are crowd funding, angel investors, partnership. You can sell startup equity in the business or find a core investor.

Funding Sources

• commercial bank loan
• crowd funding
• angel investors
• partnership
• sell startup equity
• find a core investor

9. Customer Service

Good customer service is the bedrock of the business. Make sure you hire qualified staff and provide a diverse portfolio. The staff should show professionalism by dressing appropriately with good interpersonal skill.

10. Build a Website

When choosing a business name make sure the domain name is available. Then buy the domain and a host plan. The website should be easy to navigate with images of your services. Showcase the different policies and prices. Add contact information, company policy, location and phone number.

11. Startup Costs

Cost considerations for insurance startup are securing the permit, license and insurance. Others are incorporation, rent, acquiring an office, equipment. More are staff wages, securing startup capital base.

12. Marketing

Insurance firms spend serious money on marketing. This is because of competition from other industrial payers. Advertise the company through television and radio adverts. Use billboards, flyers, posters, banners and signboards to attract patronage.

Drive traffic to your website through targeted advertisement. Join social medial circles and build a huge fan base. Others ways include offering discounts, coupons, word of mouth and free professional advice.
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