How to Start a Car Insurance Company

Enabling Yourself to Sell Insurance

1. Obtain a property and casualty insurance license from your state. This license allows you to legally sell car insurance in the state in which you hope to operate your business, and ensures that you have the necessary knowledge and skills to do so.^[1]

   1. Attend a pre-licensing course. You will likely be required to takes courses covering both insurance and ethics. These courses will be specific to the state in which you are hoping to acquire a license. Most are available online and can be completed at your own pace, but do require courses fees.
   2. Take a state-administered exam. This is required to obtain an insurances license in most states.
   3. Find out what the requirements are for your state from its department of insurance (which sometimes go by various names). They will also notify you of the financial and other requirements related to licensing.
   4. Some states will allow you to transfer your license from state to state.

2. Construct a business plan for your car insurance company. Your business plan should outline how you'll attract customers, which insurance carriers you'll work with, and what your start-up costs are expected to be, as well as your projected income for the first few years of business.^[2] Of course, there are some simpler decisions to make as well.

   1. Choose the specific location of your business. You must know the state or states in which you intend to operate to get an insurance license.
   2. Determine the actual city in which you will locate your business as well. This will help you start to consider whether you will be buying, leasing, or building an office.
   3. Know that the specifics of your business plan are likely to change as you begin to build your business.
   4. One immediate necessity of an insurance company is the ability to determine risk when insuring your clients. (Larger companies, with whom you may be able to partner or purchase information from, will have the best access to this sort of information and the cutting-edge technologies with which it is derived.)

3. Be prepared to offer as much as possible to your customers. The more policies you have, the more policy options and different rates you can offer your clients. You can even sell policies offered by other larger insurance providers.^[3]

   1. Be sure to offer liability insurance, collision insurance, and comprehensive insurance, as well as multi-car insurance policies and umbrella policies.
   2. Diminish unanticipated surprises by getting advice on your business plan from lawyers, accountants, public relations professionals, and other business people as early as you're able to do so.
   3. Develop strong relationships with contacts at other insurance providers and carriers, at all levels of the industry. These people, who you should treat as both professional peers and as friends, will likely become key avenues of information, if not formal business partners.
   4. Research what's available independently. Familiarize yourself with all of the plans you will have the capability to offer (both when you open and as you grow), as well as what it will take to offer them. Some of these will necessitate cooperation with other insurance businesses.
   5. The sooner you know who you need to work with, and who you would like to work with in the future, the better you can develop those relationships.

4. Consider purchasing an existing car insurance agency. Business acquisition has the advantages of saving time, acquiring an existing customer base, and avoiding startup costs. There are always opportunities to franchise or partner with successful insurance companies as well.^[4]

   1. Purchasing or buying into an existing company is both easier and more reliable than starting your own business – in part because the business plan is already developed and has likely been put into effect.
   2. Build your own brand to have full control of your insurance company by starting from scratch.
   3. Add an insurance company to your business portfolio by buying a franchise or partnering with an established insurance agency.

5. Know the cost of starting a car insurance company. You need to have a good idea of how much it will cost to get the company up and running. There's no benchmark amount that is required to start a car insurance company. Your business model, your location, your experience, and your business partnerships will all greatly affect this figure.^[5]

   1. There are guaranteed expenses associated with licensing, which can be quite substantial – figures in some states can reach several hundreds of thousands of dollars. While you may be able to fully license your company for under $100,000, recognize that costs such as rent, your own salary, and other necessary expenses can quickly add up.
   2. Contact the Small Business Administration (SBA) for information regarding the likely costs you will incur in starting a business, and for help securing the funding to do so.