How to open a car insurance company

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Since car insurance is one of the most profitable businesses, many want to start their car insurance business whether an agency or brokerage. In this article, John, an owner of a car insurance agency in Florida will tell us about his experience setting up his car insurance agency earlier. But if you are not interested in a launch company, and you just want to buy insurance for your car, click here.

Like many other businesses, starting a car insurance agency needs experience in sales and marketing and a lot of patience.

How to start an insurance company is a very common question and if I had read an article like this when I was first starting up my agency brokerage here, I would have probably expedited a lot of the process and the time,  so I’m hoping that you get some of that as well.

It was just a rough probably six-month period where I was just searching everywhere and couldn’t find anything and I’m going to try to keep it very very straight to the point so let’s dive straight into it.

First things first, there’s a major difference between an insurance company or carrier than there is an insurance brokerage or agency. This is commonly mistaken by customers, people, and consumers and the major difference is that, and I’ll touch on it.

An agency or brokerage conducts and sells insurance on behalf of those insurance companies or carriers. So a carrier is an example would be Liberty, Mutual, Nationwide, Progressive,  AAA, and all these big carriers that have extremely deep pockets and they’re the ones who will pay out a claim in the event of a claim, an accident or

something happens like fire.

I am an agent or broker and I conduct or sell policies on behalf and get paid commission so this is an agency brokerage so I won’t touch on how to start an insurance carrier company because I’ve never done that and I can’t speak on that. I’ve only started at brokerage and people call it a company as well because we are a company essentially so there are a few steps that I highly recommend and these are necessary.

  1. First of all, for the business structure foundation, you need this to start an insurance agency or brokerage.  First things first I highly recommend that you have some insurance experience before launching any type of business whether it’s a carrier company or agency brokerage or whatever. Have some type of insurance experience whether it’s sales, customer service, personal lines insurance, commercial insurance whatever you know.  You don’t go into it or you’re going to set yourself up for failure if you don’t know what you’re doing or you’re going to set yourself up for a very bumpy ride.
  2. The next thing, make sure you’re licensed in the state that you’re conducting insurance There’s PNC property and casualty and then there’s life and health license so you need to have that to conduct and sell insurance legally
  3. Step three. Once you have that license you need to get an appointment which is a contract essentially with those insurance carriers or companies that I was talking about above. You need to be able to have a contract with them that basically states that you will be selling a policy.

This is a  big hurdle that a lot of people run into and I won’t dive into how to get these appointments. That’s something you need to reach out to the company directly. There are ways around it and it’s and it’s not tricky to do.

  1. Another thing you need is an error in admissions policy or what is also called “professional liability insurance” that basically says “ if John Doe messes up my policy or AAA insurance messes up my insurance policy, we will protect you.”  This mistake if it is  covered or omitted or forgot to put something or change the name or made the wrong name on somebody’s policy, it’ll basically cover me you
  2. The next thing you need is approval from the department of insurance.  You basically need to get your license approved under your name saying “John Doe”  legally conducts insurance under that license number and I think it’s like an $80 fee from the department of insurance.
  3. There’s also what’s called a business entity insurance license, for example, my insurance license is “John Insurance Services LLC and I am a producer under that individual business entity license so the one that’s actually selling the policy is John Insurance and I’m just the producer agent on that business entity license so the business entity is the one who’s selling the insurance.

You need to contact the department of insurance. They’re the ones that are going to be able to explain that there’s an application and I think the business entity is a little bit more expensive so look into that you may need to get a broker bond as well.  Typically, some carriers require a ten thousand dollar broker bond. Also, check out the department of insurance and you can see what their requirements are for your specific state and most importantly patience.

The first six months that I started my agency I was completely lost and didn’t know what I was doing. Thank you to everybody who supported me. I’m now almost three years in and I know I definitely know what I’m doing now, but the first six months were really rough. I struggled a lot, didn’t sell a lot and I was just trying to build up relationships and trying to figure out structural things like this.

I’m not telling you exactly what you should do and what type of corporation or sole proprietor. You should talk to a business lawyer or somebody who’s at LegalZoom.  Go talk to LegalZoom. They’ll handle everything for you. It’s super cheap, it’s easy and they’ll help you get your stuff going but as far as an insurance agency, those are kind of the structural things you might need so always check with your department of insurance and see what is needed.

I mentioned before that sales experience is needed but even though you don’t have actual experience but love doing it, nothing is impossible.

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