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How to Become a Preferred Contractor for Insurance Companies – A Complete Guide

Do you want to start a contracting business for insurance companies? If YES, here is a complete guide to becoming a preferred contractor for insurance companies.

Due to the fact that insurance companies are highly regulated, they are not by law allowed to contract services themselves and so due to this, they usually partner with third party contractors. These contractors agree to provide services for the insurance companies at a price that is greatly discounted.

They also have to agree to limit repairs when necessary to a minimum. In essence, a contractor for insurance companies works for the insurance companies and not the consumers. Professional insurance contractors usually have a General Liability and Contractors Pollution Liability insurance coverage so as to be able to provide efficient and effective services on behalf of the insurance companies.

Why Start a Contracting Business for Insurance Companies?

There are several reasons why insurance contractors have become quite popular and one of them is because insurance companies have their clients all over the country, it is impossible to locate their offices wherever their clients are, hence the need for a contractor who is usually the eye of the insurance companies especially in areas where the insurance company cannot easily investigate the claims of their clients. The independent contractor ensures that the burden of the claim does not rest too heavily on the insurance company since the insurance company is their first client.

Asides from checking claims on behalf of insurance companies, contractors whose niches are in construction, home repairs and auto repairs are not only expected to estimate the extent of damage as claimed by the client, but they are also expected to carry out repairs on whatever it is that was damaged or look for someone that can effect repairs without costing the insurance company more than it necessarily should.

The plenty opportunities that being a contractor brings has allowed a lot of people to go into this kind of business and the fact that you are a contractor for one insurance company, doesn’t mean that you cannot be for as many as you want.

In looking to become a contractor that will be preferred by insurance companies, it is best that you conduct a thorough survey about the business just as you would have done if you were starting any business. Study the market well and know what insurance policies will more likely generate the revenue that will grow and make your business a success.

In studying the market, you will discover what insurance companies are better to work with and who your competitors are and how you can effectively win them over in order to become the preferred contractor in your region for insurance companies.

It is important to note that as every business has pros and cons, so also does an insurance contractor and so it is necessary that you weigh all the pros and cons after creating goals and objectives for your business, and then use these pros and cons to compare your objectives and decide how they best suit your projected growth as a company.

In starting your business, you will need to get it registered and also obtain all the necessary licenses that will allow you to run your business with no problems from the regulated authorities. Having all the necessary licenses will allow the insurance companies and their clients to have confidence in your company.

How to Become a Preferred Contractor for Insurance Companies – A Complete Guide

When a property or item of value is gotten by an individual, it is often insured so that should there be loss, damage or theft, the individual can file an insurance claim that will allow them receive payment. An insurance contractor is the person the insurance company sends to process the insurance claim that has been submitted by the policy holder and decide if the claim has merit and if adjustments can be made to the payments. Even though this might look like an easy enough business to go into, there are steps that have to be taken in becoming a contractor for insurance companies.

Once you have conducted a thorough research on what your duties and responsibilities will be, you will need to earn a degree even if it is a high school diploma. If you however are looking to stand out and get calls from reputable insurance companies, then getting a college degree is very necessary as it will allow you plan your curriculum according to the area you are looking to specialize in.

Once you have your degree, you will need to garner some experience especially as insurance companies want to know that you will be capable of handling the tasks you are sent to do. Once you have identified what areas you intend to work in, it will be easy enough to seek out companies in such areas where you can work part or full time to gain the experience you seek.

In getting the licenses that will allow you function fully, you must check with your state as licensing varies depending on the state. In some states, you might be required to take a licensing examination before you can get your license so it is best to check with your state’s city council or get an attorney to help you out with the licenses and permits you will need. If you do not have all the documentations required of you, not only will you run into trouble with the law, but you might lose your clients – the insurance companies – which is bad for your business.

General Overview of Insurance Companies in the United States

In 2015 according to Global Market Intelligence, the net premiums for the insurance industry in the United States was a total of $1.2 trillion, with premiums for Life and Health Insurance accounting for 55 percent of the total value, followed closely by property and casualty which accounted for the remaining 45 percent.

The property and casualty insurance sector consists majorly of auto, home and commercial insurance, while the life and health insurance sector consist of annuities and life insurance, with health insurance considered as a stand-alone. According to the United State Bureau of Economic Analysis, all insurance carriers and related activities contributed 2.5 percent of the country’s gross domestic product (GDP).

The insurance industry in the United States, according to the Department of Labor employed approximately 2.6 million in 2016. 1.5 million of the total number employed worked directly for insurance companies, while the remaining 1.1 million worked for insurance brokers, agencies as well as other insurance related enterprises.

Property and Casualty insurers in 2015 paid $15.2 billion for property losses that were related to the catastrophes that occurred in 2015 as against the $15.5 billion paid out in 2014. According to the Property Claims Services of Verisk Analytics, the year 2015 had 39 catastrophes.

The insurance industry saw its profits rise by 18 percent in 2016 compared from the drop in revenue it experienced in 2015 and the increase in profit is due to the lower frequency of catastrophes either natural or man-made. The industry expense ratio also decreased to 25.7 percent in 2016. Due to the lower claims for catastrophes, the loss ratio in the insurance industry improved to 66 percent in 2015/2016 as compared to the 68.5 percent that it was at in 2014/15. The industry is however experiencing pressure on its premium as competitive market conditions are expected to continue.

There are emerging top trends that are having a great impact on the insurance industry and they include; the use of new technologies to not only improve the experiences of customers but to also deliver products and services that are innovative in nature.

The challenges for the property and casualty insurers as driverless cars will mean liability shifting from human to manufacturer. Also, insurance companies are expected to continue to improve on their conduct and culture as customers have begun to mistrust general insurers especially as they feel that decisions taken are usually to their detriment.

There has been a major evolving shift in the life insurance industry as insurance companies are no longer offering straight insurance but are attempting to convince customers on their array of investment type products and as a result of this are able to compete directly with financial services companies.

Also, aside investment products, insurance companies are also now offering services that relate to tax and estate planning. There are also multiple insurers, in a bid to reduce risk for each insurer, share an insurance policy. This means that primary insurers are getting an insurance to protect them against catastrophes.

General Overview for Insurance Contractors in the United States

Insurance companies are highly regulated by the law not to directly provide property damage contracting services and so due to this regulation, insurance companies have partnered with vendors or contractors referred to as middlemen to help in providing services on behalf of the insurance companies at a price that is greatly discounted and to ensure that any repairs carried out are done at a minimum cost. This therefore means that these middlemen work for the insurance companies and not the policyholders.

Due to the fact that most contractors always work for the benefit of the insurance companies and not the policyholders, there are several contractors that have chosen not to go into partnerships with the insurance companies and so work on behalf of the policyholders. The law states that a policyholder can reject the contractor from the insurance companies and instead look for a vendor that will work on their behalf in ensuring that the repairs carried out on their properties are done according to standard.

As a contractor, it is important that you are properly insured to provide certain services as statistics show that 90 percent of contractors in the United States (individuals or companies) are not properly insured. If you are looking to become a contractor that policyholders trust, it is essential that you have general liability and contractors pollution liability insurance coverage.

4 Factors to Take into Account When Approaching an Insurance Company

In looking to become the preferred contractor for an insurance company, your responsibility as a contractor is to check on certain factors. This is not to say that the factors used below in analyzing the insurance company is enough or the only ones, but it goes a long way to offer the contractor the necessary information that will help in making the right decision as regards which insurance company to work for.

  1. Leverage

In looking to be the preferred contractor for an insurance company, it is important that you check out the company’s balance sheet in a bid to know its quality and strength. This is because insurers take in premiums and pay out claims to policy holders every day and so you must check to know if the insurance company has the ability to meet the payout claims to policy holders.

And so it is important that the insurance company in question is able to keep leverage intact which can be done by writing more insurance policies, depending on reinsurance but not too much, and also making use of debt.

2. Liquidity

This is another factor that must be taken into consideration as it is considered an acid test that looks into the ability of the insurer to meet financial obligations. This means that the insurance company must have enough short-term assets in which it can use to cover its liabilities without having to sell its inventory. The insurance company must also have a cash flow that is regarded as positive.

The contractor should also take into consideration other key factors such as the investment grade of the insurance company’s bond portfolio, as an indication of instability could mean that the company has too many medium and high risk bonds.

3. Profitability: Just like any other business, an insurance company’s main determinant is how profitable it is for you the contractor as well as for its clients. There are two components that you can use in deciding the profitability of an insurance company and they are; underwriting income and investment income.

Any revenue that is derived from issuance of insurance policies can be referred to as underwriting or premium income. You can determine how good an underwriting income is by checking its average growth rate from the past years. Most of the incomes of insurance companies come from investments and you should ensure that the investments are in low risk bonds, money market securities or in equities.

4. Interest Rate Fluctuations: Due to the fact that insurance companies usually invest most of its collected premiums, what a contractor should lookout for is the income generated from these investment activities which are usually dependent on the fluctuations of the interest rates.

If there is a decline in interest rates, then that means the insurance company has a slower income growth from its investments. The fluctuations in the interest rates could also be said to affect the company’s debts. If the intention of the insurance company is to re-price its debts or borrow more, then a high interest rate would mean that cash flow will be very much affected.

Niche Areas for Insurance Contractors in the United States

According to a study by Independent Insurance Agents and Brokers, contractors that specialize in niches and also focus more on improving technology, had a higher chance than those who weren’t. The focus on niches has had contractors increase their referrals and targeted leads, boost their competitiveness and also improve retention rates.

The average growth in revenue especially from commission and fees has grown tremendously. The boost in revenue also came about as a result in social media marketing, search engine optimization and improved producer accountability, which therefore led to increase hiring.

In looking to go into a niche area, you must ensure that you have made the proper research regarding the business as some niche areas might not generate the amount of revenue that will make going into that niche worth it. Also, some niches boom more in certain areas or regions and all these must be taken into consideration by you. Some of the major niche areas that you can go into are;

i. Construction Contractor: As a construction contractor, you get to work on claims that occur in the property or homes of the policyholders on behalf of the insurance companies. It is pertinent that you have the required knowledge about construction as not only will you assess the repairs, but you will also carry out repairs when and where necessary and send an invoice to the insurance company.

ii. Auto Repair Contractor: As with that of a construction contractor, you must also have knowledge about vehicles, their different types and how to carry out repairs when and where necessary except in areas where the vehicle has been damaged beyond repair. Having a workshop is necessary for this kind of contractor unlike the construction contractor.

Equipment and Tools Required You Need to Become an Insurance Contractor?

As with every business, there are certain tools and equipment that you will need to help you carry out your business as efficiently as possible. Some of the tools might vary depending on the area where you intend to specialize in your business in.

There are however standard tools that you will need regardless of the niche area you are in. You will need to have a vehicle that you can move in, license, software (accounting and client), flashlight, gloves, tapes, office supplies and then the tools that are applicable to the area of your business. Some of the tools can be gotten as fairly used if you are looking to save up on cost when starting your business.

Legal Documents Required to Become an Insurance Contractor

As an insurance contractor you will require certain legal documents to be in place before you can start and run your business successfully. The necessity of having legal documents in place is so that you do not run into trouble of any sorts with constituted authorities, as you might not only be fined if you are found to be running your business without having all the legal documents in place but you might also be stopped from running such a business either in that area or all over the country.

So it is important that you make necessary findings and consult an attorney or accountant where necessary in order to know all that you will need. Asides from running into trouble with the authorities, you might get your contract terminated by the insurance companies you are representing and might even be sued for misrepresentation.

While some documents are regarded as basic, some might vary depending on the area or region where you are operating from. Some of the basic documents that you will however require regardless of the area where you will be operating from are;

  • Certificate of incorporation
  • Operating Agreement (for LLCs)
  • Business License and Permit
  • Business Certification
  • Insurance Policies
  • State Employer Identification Number (EIN)
  • Federal Tax Identification Number (TIN)
  • Consulting Contract Documents
  • Signed Agreements

Professional Certifications Required Before You Can Become an Insurance Contractor?

In trying to become a preferred contractor that will be sought after by companies, it is best that your resume is rock solid and this means that you should have the necessary certifications and experience that will make the insurance companies have faith in your ability to work on their behalf.

While getting the necessary professional certifications on the niche you intend to go into is very necessary, having experience is very important and so to garner this experience, it is best that you engage in similar projects on your own even if you have to work for little or no money so as to rack up your resume and get insurance companies to be interested in you.

It is important to note that professional certifications vary depending on the niche which you may have chosen to engage in. This is because the professional certifications that you would get if you were a contractor with a niche in construction will be entirely different from that which you would get if you wanted to specialize in claims or auto repairs.

There are several college degrees that you can get and then you could look into any professional certifications offered by reputable associations and try and get those as well. To garner the experience needed, you will need to work with a reputable organization that corresponds with the niche that you are in as that will help boost your profile to insurance companies.

Limiting Factors Prevalent for Insurance Contractors

Any entrepreneur starting a business should be aware that there will be several challenges and threats that might crop up during the course of starting the business and should therefore be prepared by having solutions to these challenges whenever they crop up.

This is why it is necessary for an entrepreneur to have a business plan as this would help him predict what challenges might likely occur during the process of starting or running the business so that the entrepreneur can act proactively when it is time.

An independent contractor is seen as one who has signed an agreement with an insurance company in order to perform certain jobs or functions on behalf of the insurance company without the direct involvement of the insurance company.

While this might seem like such a perky business for any entrepreneur with the right skills and abilities, it is not all rosy being a contractor for an insurance company because the clients of insurance companies who want their claims investigated might not trust the contractor sent by the insurance company due to the fact that these contractors are working for the interest of the insurance companies and not the complaint and so might usually prefer to hire a contractor of their own.

Another factor that might be limiting for one who is looking to become a contractor is what niche will be most profitable depending on the area or region one will be operating from. If you specialize in a niche that is not so popular, you may not generate as much revenue that will see your business grow and become a success. If you however choose a niche that is quite popular, you should be aware that you will face stiff competition from those already in the business as well as from new players that will be looking to come into the same niche as well.

When starting out, you are literally unknown and this can be regarded as a limiting factor especially as you have to engage in more publicity and advertising campaigns than those that already exist in order to get the attention of insurance companies.

This is regardless of how many professional certifications and experience you might claim you have, as insurance companies may prefer to stick to contractors that they have been working with especially if those had been performing to the expectations of the insurance companies.

And so while sending a formal letter to certain insurance companies might be to your benefit, letting them know what benefits they are likely to get working with you might push the ball to your favour and ensure that you become a preferred contractor for these insurance companies.

Marketing and Promotion Strategies for Insurance Companies Contractors

Every entrepreneur starting a business realizes how important it is to create awareness in order that the intended target market might notice it. The awareness of a target market allows the entrepreneur to convert a percentage of the awareness to revenue generation.

Realizing that revenue must be generated is one thing, knowing how to go about generating this revenue is another ballgame altogether. The definition of marketing has it that an entrepreneur not only has to know the need of the intended target market, they must also be able to plan towards meeting this need in order to ensure that satisfaction is achieved.

One of the most important factors that will need to be taken into consideration when marketing your insurance contractor business is your location. If you are located so far away from the area where the clients of your intended target market are situated, then you must either offer some benefits that the insurance company will be getting if they take you on as their contractor, or you have established an office near the hub of the target market of the insurance company in which you intend to become a contractor for.

This will not only make it convenient for the insurance company in question but for you as well as it will be saving you an otherwise long commute each time a complain comes up in the vicinity where the insurance company has enough set of customers.

Even though the aim of marketing is to generate revenue, it is a process that has to do with the penetration of the target market with an aim to getting a fair market share and using that to compete with existing as well as new competitors.

This is why it is therefore necessary that every entrepreneur creates marketing ideas and strategies that are deliberate in nature and the only way this can be done is if a thorough market survey regarding the industry is done in order to know what niche is more beneficial, who the target market are, what their identifying characteristics are, and what to expect from them.

If you are stumped on what marketing ideas will be effective for you, you can engage the services of an experienced marketing consultant who knows the industry you are in and who will create marketing strategies that will be very effective in making you stand out amongst others.

It is important to note that while some of the marketing strategies can be quite costly, others may not cost as much. Regardless of how costly some might be or not, having a marketing budget is very important so you do not end up spending more than you should have. Also, the internet has put up lots of ways by which entrepreneurs can easily get the attention of the target market.

Some of the marketing and promotions strategy that you might need to consider when looking to get the attention of insurance companies in order to become their preferred contractor are;

  • Introduce your business by sending a formal letter listing your certification and experiences, other benefits that can be gotten from employing you, as well as your contact information and your commission charges, to your preferred insurance companies
  • Ensure that you place advertisements about your services in newspapers as well as on radio and television stations
  • Create a website for use; have your services and contact listed and then deploy SEO strategies so that your website can rank tops in search engines and enable you to be seen by potential clients
  • Make use of social media platforms such as Facebook, Twitter, Linkedin and Google Plus to vigorously market your insurance contractor business
  • Appear on popular forums and blogs in order to not only create posts that are educative and enlightening in nature but also participate in the forum in order to create awareness about your business and your services
  • Attend seminars, conferences and events that are related to insurance so as to network and get the attention of insurance companies that might hire your services
  • Place adverts online on popular blogs and forums that has a large number of traffic in order to generate awareness for your insurance contractor business

Conclusion

Becoming the preferred contractor is not easy because this would mean that these insurance companies are not only aware of your existence but that they are also willing to contract your services and make you their preferred contractor in areas where they have customers but are not physically present. There are several attributes that you must possess before this can happen and it is therefore essential that you conduct a thorough research on what you will need so that you are not considered unserious by the insurance companies when you approach them to work on their behalf.

You must know what niche you intend going into and the intensity of competition you are likely to face in going into this niche so that you can adequately prepare for them. Once you have identified the niche that will be most beneficial to you, you should get all the certifications that will allow these insurance companies to give you an audience as well as the necessary experience.

Once you have gotten all you need, then you should write to the insurance companies you would like to work with and state why they should work with you. Once you have been hired and your commission agreed upon, you must ensure that you diligently set about your duties by working to ensure that you achieve the goals and objectives of the insurance companies and in this way, you can eventually become a preferred contractor for these insurance companies.

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