How to Start an Insurance Business
Starting a new business of any kind can be tough in an uncertain economic climate. If it's in a subject area that is unfamiliar to you and will require you to get specialized training and licensing, the learning curve can be even steeper. On a positive note, however, insurance is something that no one can afford to be without. If you have a passion for sales and helping clients make smart choices, this could be a successful endeavor for you.
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Things You'll Need
- A license to sell insurance A business license Start-up capital A website
Instructions
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1
Assess your communication skills and your ability to be an effective sales person. A career in insurance requires someone who can communicate well in person and on paper, is zealous about networking, is diligent about record-keeping and staying abreast of market trends and insurance products and is a self-starter when it comes to finding new clients.
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Assess your current financial status. It takes time to get a new business under way and you will have to have enough resources to support yourself during this period as well as put money into the development of a website, a corporate identity and advertising. You also need to take into consideration whether you will be meeting your clients at their homes and businesses or will require an office for them to come to you.
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Identify what type of insurance products you want to sell to your clients (i.e., auto, homeowners, health, life, workers comp). While large agencies are able to offer a broad range of insurance products, small entities tend to specialize in one or two areas and become recognized as industry experts (i.e., boat insurance). Because insurance products are available for a wide range of prices, you need to take into consideration what kind of commissions you want to earn. If you want to earn commissions at the high end of the scale, for instance, you won't be able to do so unless you're selling high-end packages.
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Draft a business plan for your new company. Identify how much time you can reasonably allocate to the business, set quotas for yourself in terms of attracting new clients each month and determine how much money you'll need to bring in to meet your financial obligations. If you need to get funding to start your company, investors such as banks are going to want to review your business plan and feel confident that you know what you're doing.
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Get an insurance license. The laws governing insurance vary from state to state and in order to legally sell insurance-related products, you'll need to take a state exam authorized by the Department of Insurance. Upon passing it, you'll receive your license and be able to hang out your shingle as an insurance agent. Be aware that different types of insurance products call for separate licenses for which you'll need to pass written exams. Throughout your career, you will need to keep your license(s) current by taking continuing education classes. Many owners of insurance companies also hold brokers' licenses.
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Get a business license and a federal tax I.D. number. This is required by state and federal law. If you plan to operate your insurance business under a fictitious name, you will also need to register it with the Secretary of State's Office. The website of the Small Business Administration (See Resources section) is one of the best resources available for entrepreneurs and walks you through the necessary steps to establish your corporate identity and make sure it gets off on the right foot.
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Design a professional website about the services and products you have to offer. This website should be easy for prospective clients to navigate and include a brief bio so that they can get to know you. Many insurance websites also utilize online questionnaires so that agents can get an overview of what clients are specifically looking for.
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Recruit agents to work for you as your company starts to grow.
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Tips & Warnings
If you move to a different state and want to continue selling insurance, you'll need to get a new license. It's often helpful to work for someone else before you branch out on your own. If you're brand new to the insurance business, go to work for an existing company after you get your license to acquire some hands-on experience. Always make sure that the people you hire to work for you have valid licenses. Practice insurance exams are available online and can help you prep for the real thing. Stay abreast of insurance issues and legislation through resources such as the American Insurance Association.
If your plan is to work for an insurance company and then start your own, they're not going to look favorably on your taking their established clients with you. Maybe companies, in fact, will have you sign an agreement upon hiring that you're not going to do that. If you turn around and do it anyway, the bad will and potential lawsuit you could generate will not have been worth it.
