How to Start an Insurance Company From Scratch [2021 Guide]

start an insurance company

The average insurance agency owner makes about $70,000 a year. That’s not bad, and know that there’s not a limit as to how much an agency owner makes.

That’s why starting an insurance company is appealing right now. There’s a huge need for good insurance companies for health, life, auto, and business insurance.

It isn’t easy to start an insurance agency. The field is competitive and many businesses don’t make it beyond a few years.

You can get ahead of the competition and put your insurance company in a position to be a resounding success. Keep reading to learn how to start an insurance company from the ground up.

1. Assess Your Strengths

Do you have what it takes to run a business? You may know the insurance industry inside and out, but that doesn’t automatically qualify you as a business owner.

You need to be familiar with every aspect of running a business, from marketing to accounting. You also need to know how to manage people if you plan to expand and grow your business.

Your first step should be to learn the qualities and strengths you bring to your business. Assess your weaknesses, too because you’re going to need help in those areas.

You could find that one of your strengths is sales. One of your weaknesses could be financial management. It’s a good idea to rely on your sales skills to bring in clients and outsource your bookkeeping and accounting.

2. Write a Business Plan

The business plan is a necessary step because it requires you to think long and hard about what your business should be like.

For instance, do you want to be an independent agency or open a franchise of an existing brand? How many sales reps would you like to have work for your business?

There are pros and cons to every answer. An independent agency gives you more freedom because you can give clients insurance policies from any company. A franchise means that you’re stuck with that one insurance company.

You also have to decide what type of insurance you want to sell and to whom. Don’t miss this step by saying that you want to work with anyone who wants insurance.

That’s a sure way to get zero clients.

You want to say if you serve commercial clients or baby boomers. Perhaps you want to work with young families who have changing insurance needs.

Once you decide on your target market, you have to figure out why people want to use your insurance agency rather than the other agencies in your area.

3. Get the Appropriate Licenses

The requirements to start an insurance company vary from one state to the next. You need to know what the laws are and the regulatory agencies you need to register with.

If you plan to open an office, you may have to register for permits in your city. There are usually regulations for business signage and zoning.

4. Name and Register Your Business

What will you call your business? If you open up a franchise, that part is taken care of. However, you have an opportunity to create a powerful brand if you have an independent insurance agency.

Once you have a name in mind, look for and purchase a domain name. That’s the URL address that people type in to find your website. Be sure it’s short and memorable.

You also have to register your business with the division that handles corporate registrations. You should consult with an attorney before you register your business.

That’s because you need to declare a legal entity for your business, such as sole proprietor or LLC. The legal entity has legal and tax implications, so you need to choose wisely.

5. Create a Sales Process

Insurance sales are all about getting quality leads and closing them. You need to have a system in place because you will work with a lot of people at once. A system helps you handle more work in less time.

Let’s say that you work with older couples and sell final expense insurance. This type of insurance covers funeral costs and some medical bills.

You’ll want to have a system in place for generating leads. You can do this on your own or buy quality final expense leads.

You can enter each lead into a CRM and manage the leads from there. You’ll know when to follow up with them, and know where they are in the sales process.

6. Promote Your Business

You may have great insurance leads to start with, but you still need to get out into your community. Promote your insurance business by getting involved with your local business community.

It’s a great way to expand your network and get more clients. The more clients you get, the more likely you’ll be able to get a lot of referral business.

7. Have a Follow-Up and Referral System

Speaking of referrals, don’t assume that people will just refer their friends to your business. Make asking for referrals a part of your sales system.

Also, make it a point to meet with clients regularly to review their insurance policies. This is a service that few companies offer and it will set you apart. You’ll end up with happy clients because they always have the right insurance policy for their needs.

How to Start an Insurance Company

Now that you know what it takes to start an insurance company, are you ready to get started?

You have to assess your personal strengths and get help for your weak areas. You still need to write a business plan and register the business. Most of all, you have to have systems in place to be able to sell more and serve more.

Do you want more tips to help you grow your business? Take a look at the other great articles throughout this site.