Do you want to start an insurance brokerage firm? If YES, here is a complete guide to starting an insurance brokerage business with NO money and no experience.

Okay, so we have provided you an in-depth sample insurance brokerage business plan template. We also took it further by analyzing and drafting a sample insurance brokerage marketing plan backed up by actionable guerrilla marketing ideas for insurance brokerage firms. In this article, we will be considering all the requirements for starting an insurance brokerage business. So put on your entrepreneurial hat and let’s proceed.

Why Start an Insurance Brokerage Firm?

The insurance sector over the decades has grown in leaps and bounds and this is because of the immense benefits that come with being insured. Companies that offer insurance products to businesses are referred to as brokers and they are broken down into two; captive agencies that operate as agent to a single insurer, and independent brokers that sell products from several providers.

Most brokerage firms usually fall into the latter as this affords them the opportunity to have a wide variety of customers who might prefer to have options when it comes to insurance instead of having to stick to just a particular insurer. In the United States, almost everyone has insurance and all businesses are mandated to have insurance as well, which means that this is a lucrative business for any entrepreneur to go into.

If you have the right entrepreneurial mindset, then you might find out that it is best for you to start your own insurance brokerage firm than to work for an insurance company. Also, you should note that starting your insurance brokerage firm as an independent means that you have a chance, even against already established brokerage firms, as clients are becoming fed up with the disruptions caused by firms that are either consolidating or are being taken completely over. However, before starting this business, ensure that you have the attitude, vision, insurance background, expertise, sales success and the business acumen to make your business become a success.

Asides from having the attributes that will readily make your business to become a success, it is also important that you understand the rules set by the industry and the government regulations guiding your business as ignorance of these regulations and policies are no excuse under the law. Your insurance brokerage firm must remain compliant with all guidelines as breaking any laws might not only get you penalized, but you might also be banned from running that kind of business anywhere within the country.

If you are going to be sourcing for startup capital from external investors or from a commercial bank, then it is necessary to have a comprehensive business plan in place.

As an independent insurance brokerage firm, you might need to make a list of insurance companies so as to compare what they offer and then settle for the carriers you will eventually represent. While selecting as many carriers as possible is very necessary, you shouldn’t however pick too much when starting so that you do not get overwhelmed by the whole process.

Once you have decided on the carriers you wish to represent, then you should contact the carriers, explain your intentions and then request for an agent kit so that you can understand each carrier’s arrangement with brokers.

Starting an Insurance Brokerage Firm – A Complete Guide

  • Industry Overview

The insurance brokers and agencies’ industry in the United States of America generated revenue valued at $157 billion annually and has had a 3.7 percent growth since 2012 to 2017 according to IBISWorld. There are nearly 425,000 insurance brokers and agencies in the United States of America employing nearly 996,000 people.

The industry is one that has grown steadily especially as the economy has grown strong bringing about an increase in disposable income levels whilst simultaneously lowering the rates of unemployment. However, the industry has had its own share of challenges especially as it has faced intense and increasing competition from underwriters who were giving clients direct insurance services.

These underwriters have brought down client’s dependence on independent brokers and agencies as they have started expanding their sales abilities by investing in their own sales website and also bringing diversity to their sales divisions.

The insurance brokerage and agency industry is also facing pressure as regards pricing from online carriers as well as online brokerage firms. The prediction for the insurance brokerage industry for the next five years is that there will be moderate growth even as the larger economic landscape is poised to improve tremendously. Niches such as life and health insurance are perceived to grow tremendously as the general economy improves.

In order to be able to counter increasing competitive pressures from underwriters, traditional insurance brokers have sought to provide a leverage for themselves by offering added services such as becoming risk managers and acting as insurance advisory experts for clients.

Also, insurance brokerage firms have hired highly skilled employees so as to compete fairly and this has helped the growth of the segment of the industry despite the activities of the reinsurance market and the decline in premium rate charges both in the primary property as well as the commercial insurance market.

Majority of the income (57.7 percent) that has been generated in the insurance brokerage and agency industry in 2017 is majorly from commissions from commercial and personal lines of property and casualty (P&C) insurance.

Most of the brokerage firms in the industry usually prefer to specialize in life insurance, property and casualty insurance or health insurance but more brokerage firms prefer to sell multiple lines of insurance especially as the type of insurance that is being sold determines the organization of the industry. Also, the reason why more brokerage firms prefer to be independent than work for insurance carriers directly is so as to be able to generate more revenue rather than be constrained.

Globally, the insurance industry which consists of agents and brokers generates annually nearly $5 trillion in premium volume according to research study by Swiss Re. Insurance markets that has to do with non-life is experiencing tremendous growth in developed nations that are in North America and Asia, while emerging markets in Asia and Latin America have been experiencing strong sales particularly in life insurance premiums.

There are about 133,000 insurance agencies and brokerage firms in the United States alone – this number includes companies that have single and multiple locations – and they all generate annual revenue of nearly $120 billion.

According to research analysts, the global insurance brokerage industry has been predicted to grow at a steady CAGR of 4 percent 2015 to 2020. The primary growth drivers for the market are from the change in the demographics of customers as well as the growth of the economy.

There has also been an increase in the population of baby boomers and also the population of the Gen Y, which has brought about an increase in the various health insurance products. Top insurance brokerage firms are taking advantage of this period to come up with different strategies that will allow clients have better value for what they are paying for.

Globally in 2015, North America accounted for 53 percent of the market share and the CAGR for the region is expected to grow at 5 percent for the periods between 2015 and 2020. The North American region is growing at such a rapid rate due to the fact that locally, the industry has seen enough consolidations coupled with high rising technological capabilities that have therefore allowed insurance brokerage firms to reach markets that were previously untapped or under-serviced.

Also, brokers and agents have been able to challenge the traditional operations and also utilized opportunities brought about by the disruptive market to be able to not only innovate but also create long-term strategies that are sustainable.

Starting an Insurance Brokerage Firm – Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who require the services of an insurance brokerage firm are not only individuals but businesses as well as insurance carriers, providers and underwriters.

This shows that those who need insurance are not limited to just a certain group or people or business as it cuts across all kinds of people and businesses in the United States of America. Therefore if you are looking to define the demographics of your insurance brokerage firm, you should strive to make it all encompassing.

List of Niche ideas Within the Insurance Brokerage Industry That You Can Specialize in

The insurance brokerage firm is like a third party agent as they help those that do not know what insurance policies to go for as well as those that want the choice to compare what several providers are offering in order to pick what they feel is better for them.

There are several areas in the industry and if you decide to specialize in certain services or areas, you should try and make researches on which niche would generate more revenue for your firm. If you are starting out on a small scale, then you might have to offer few specialized services; however, if you are starting out on a large scale, you can offer all the services in order to be able to have a larger pool of clients.

Below are some of the niche areas that are available for you if you are looking to start an insurance brokerage firm;

  • Property and Casualty Insurance Policy Brokerage
  • Life and Accident Insurance Brokerage
  • Health and Medical Insurance Brokerage
  • Annuity Brokerage
  • Reinsurance Brokerage and Administration
  • Risk Management Consulting

The Level of Competition in the Insurance Brokerage Industry

The level of competition in the insurance brokerage industry is such that one can compete from anywhere in the United States as long as you are able to the sell products of as many insurance providers as you can. This does not however mean that you do not have to be physically present at a location as most people usually go to the closest insurance brokerage that they can see even if it has few providers.

The demand in the insurance brokerage industry is directly linked to the income by consumer as well as commercial activity. This means that if the economy experiences a growth, so will the demand for personal and business insurance increase, but once the economy experiences a downfall, demand for insurance products will reduce drastically. This therefore means that the industry is dependent on the growth and stability of the economy.

If you are therefore looking to start your insurance brokerage firm in the United States of America, you should be prepared to compete with other brokerage firms especially as this kind of business is one that demands persuasive skills. Even though the large insurance brokerage firms have largely determined the trend in this industry, smaller companies have also been able to compete as well by offering personalized services to their clients.

List of Well – Known Brands in the Insurance Brokerage Industry

In every industry, there are brands that stand out and become well known by industry stakeholders and even those outside the industry due to several varying reasons such as location, the size of the brand, the name, its customer service relationship, how long it has been in business, its marketing and publicity strategies or even its logo and the insurance brokerage industry is no different as several brands have made an impact.

Below therefore are some of the well-known insurance brokerage firms in the United States of America and even globally as well;

  • Brown & Brown, Inc.
  • Arthur J. Gallagher & Co.
  • Marsh & McLennan Companies, Inc.
  • Aon Corporation
  • Willis Towers Watson PLC
  • Jardine Lloyd Thompson
  • BB&T Insurance Services
  • HUB International
  • National Financial Partners

Economic Analysis

The insurance industry is benefiting largely from the fact that more baby boomers are living longer as this means that they get to increase their demand for health insurance, even though this is seen as bad news for the health care system in the United States. To maintain their profit levels, health insurance firms are beginning to charge more to cover for less.

The insurance industry is seeing a higher demand for its products especially as the population in the United States is growing. The insurance industry has been experiencing a lot of consolidations and making great technological strides, which has led to decreasing job opportunities in the industry. According to the United States Bureau of Labor Statistics, the insurance industry only experienced an 8 percent growth between the periods of 2002 and 2012.

The increasing redundant job positions that are being experienced in the industry are also due to the fact that certain internal business processes and interactions with clients are becoming more automated, meaning less people will be required to man these positions. This increasing role of technology is largely going to affect most insurance agents, brokers and underwriters.

However, it is not all doom and gloom as there are certain roles that cannot be replaced with technology and these roles are expected to continue growing. Also insurance brokers who sell a variety of insurance policies from different carriers are likely to fare much better in the war against technology than those who are traditional insurance agents and brokers.

Starting Your Insurance Brokerage Company from Scratch vs Buying a Franchise

If your intention is to buy a franchise, then you must look at the available franchise opportunities in order to use their capabilities and rates to determine what will be best for your business. Making a thorough research will ensure that you do not waste money in buying a franchise that will not be worth it. A good franchise should enable your business grow in whatever direction you want while providing you with the backing that will make your business to become a success.

When starting your business from the scratch, you have the opportunity of knowing your business intimately from even though starting from the scratch might be a bit overwhelming. When starting your business from the scratch, you have the opportunity to steer your business in any direction you want especially when circumstances occur that will warrant your reaction.

Possible Threats and Challenges You Will Face When Starting an Insurance Brokerage Company

When starting any kind of business in the United States of America, it is important to be aware of the fact that you are going to face a lot of threats and challenges, and you should prepare adequately to face any threats and challenges that will crop up during the course of starting or running your business. You should be aware that while some of the threats and challenges can be controlled, others cannot be and when those you cannot control occur, then you have no choice than to remain optimistic.

Some of the threats and challenges that you are therefore going to face when you start your insurance brokerage firm are; intense competition from already existing insurance brokerage firms, increasing government regulations, economic downturn which will affect the demand for insurance products and competition from new insurance brokerage firms.

Starting an Insurance Brokerage Firm – Legal Matters

  • Best legal entity to use for this type of business

There are several attributes that you would need to take into consideration when you are looking to decide on what legal entity would best suit your business and these attributes are; flexibility, taxation, ease of ownership, control and liability.

Even though there are basically five kinds of legal entities in the United States for any entrepreneur looking to start their business; not all are suitable for every business. For instance the sole proprietorship and partnership kind of legal entity when used for this kind of business will severally limit the capability of the business, which is why entrepreneurs usually go for either a corporation or a Limited Liability Company (LLC).

In a corporation kind of legal entity, the business is regarded as a separate entity from the owners. This kind of legal entity is usually harder to set up and would require the help of a lawyer to do so. This legal entity is not so flexible and there are so many formalities and procedures involved.

The LLC kind of legal entity is one that is a bit similar to the corporation in terms of separation of owners and business but this kind of legal entity is usually more flexible when setting up and also during taxation. While this might look like the best legal entity for your insurance brokerage business, you should know that certain procedures might differ depending on the state where you will be operating from.

Catchy Business Name Ideas Suitable for an Insurance Brokerage Company

When starting a business, it is necessary that you consider what you are going to name your business, because just as humans have to be named so do businesses as well. The name of your business can lead to a widespread recognition for your business and so must be chosen with care. Some of the factors that you would need to take into cognizance when choosing a name for your insurance brokerage firm include; easily pronounceable, catchy, memorable and indicative of the industry you are in.

Therefore some of the catchy business names that will be suitable for you starting your insurance brokerage firm include;

  • G&G Corporation
  • Mass Insurance Brokers
  • Mesh Corporation
  • McWells and Co., Inc
  • Arthur Bonang, Inc
  • Servis Group

Insurance Policies

Even though you are running an insurance brokerage firm where clients come to seek advice on which insurance policies will be best for them and to also purchase premiums, you are considered to be running a business and will require insurance policies to protect you. Knowing how mandatory it is for businesses in the United States to have their insurance, it is important that you create a budget that will let you buy all the insurance policies you might need for your business.

Below are some of the basic insurance policies that you should consider purchasing if you are looking to start your insurance brokerage firm in the United States of America;

  • Health Insurance
  • General Liability Insurance
  • Errors and Omissions Insurance
  • Workers Compensation Insurance
  • Business Owner Policy
  • Auto Insurance
  • Property Insurance

Intellectual Property Protection/Trademark

The insurance brokerage firm business is a service based business and as such there will be no need for you to worry about procuring intellectual property protection when starting your business.

Some entrepreneurs in this industry consider their company name, logo, slogan or certain materials as very important and therefore apply for intellectual property protection for these aspects. If you consider this as a priority as well, then you might consider engaging the services of a lawyer that understands the business well to help you file your trademark rights with the USPTO.

Is Professional Certification Needed to Run an Insurance Brokerage Firm?

As an insurance broker, you are seen as a representative who helps individuals and businesses to find insurance policies that will best meet their needs and requirements. To become successful as a broker, it is expected that you have thorough knowledge of the insurance market and you must also be licensed in specific insurance areas before you can sell policies to clients.

If you are however interested in obtaining professional certifications to boost your profile, then you should consider the ones below;

  • Certified Insurance Counselor (CIC)
  • Certified Risk Manager (CRM)
  • Certified Insurance Service Representative (CISR)
  • Certified Financial Planner (CFP)

While these certifications will help boost the profile for your company, you should realize that they are entirely voluntary.

List of Legal Documents You Need to Run an Insurance Brokerage Company

In any business that you intend to start up in the United States of America, it is essential that you have the required legal documents necessary to start and run your business without hitches of any sort from the law or regulatory authorities.

If you do not have all the legal documents required of you, not only will you be contravening the law, but you will also be punished should you be caught. The punishment might range from financial penalty to being banned from running the business within the country. If you aren’t sure of what legal documents you might require, it is best to approach a lawyer to help you out.

Some of the basic legal documents that you will require in order to run your insurance brokerage firm are;

  • Certificate of Incorporation
  • Operating Agreement
  • Contract Documents
  • Business Licenses
  • Business Plan
  • Insurance Policies
  • Employer Identification Number (EIN)
  • Federal Tax Identification Number
  • Employment Agreement

Financing Your Insurance Brokerage Company

Whatever business you aim to start will require start-up capital no matter how trivial the business might look and the insurance brokerage business which is one that requires moderate investment of capital is not left out. Sourcing for start-up capital can be quite demanding for an entrepreneur, which is why it is usually advised that you have a business plan as this will aid you source for capital from private investors and even the bank.

Some of the sources where you can look for start-up capital for your insurance brokerage company are;

  • Generate part of start-up capital from personal savings and sale of stocks or properties
  • Apply for loan from a commercial bank
  • Approach a venture capitalist or a private investor for loan

Choosing a Suitable Location for your Insurance Brokerage Firm

Choosing a location for your insurance brokerage business is very important as the location you eventually choose for your business can have an impact on the business, so it is essential that you take your time to choose a befitting location. The location you must aim towards must be in an area that is determined as highly respectable and has a lot of traffic as this will ensure that some of this traffic comes into your office to make inquiries at certain points in time.

This does not however mean that you cannot run your insurance brokerage firm from home especially if you are starting off by yourself and are strained by budget. Working from home however is not something that can be handled by everyone especially as there are a lot of distractions that can come from family, pets and the television.

Also, you would need to create an area separate from the rest of the house so that your documents aren’t tampered with. While working from home can help save overhead and running expenses, working from an official facility would be very helpful in propelling your business to the success it deserves.

When looking to choose a location for your business, it is necessary that you choose a place that is conspicuous, within the hub of your target market and easily accessible. If you take your location to a place that is not too conspicuous, you might need to spend more in order to garner publicity for your business.

If you are not too sure of the location that you would be most appropriate for your business, then you might need to engage the services of a real estate agent with the right knowledge of your business as they would know what area would be most suitable for your business, within your own budget, so as not to cause a strain on your overall budget.

Starting an Insurance Brokerage Firm – Technical and Manpower Details

In starting your insurance brokerage firm, you should be aware that there will be a lot of costs involved especially as there are things that would need to be in place before your business can be up and running. You might need various licenses to cover several of the niches you intend to offer; the costs might vary depending on the state where you intend to operate the business from. Also, certain licenses will require you writing an exam and paying for the exam in addition to the license.

Also, in starting your insurance brokerage business, you will need to ensure that your business is registered with the appropriate state agencies so that you can be allowed to report and also collect sales tax.

Setting up an office and procuring equipment needed to ensure that the business runs smoothly depends on the location and state where you intend to run the business from. Since businesses especially those in the insurance industry are beginning to be heavily automated, it is essential that you acquire equipment that will allow you run your business efficiently. Some of the equipment can be gotten for fairly used; however, ensure that they work well before getting them as fairly used. The equipment you will need are; computers, phones, printers, fax machines and software.

It is essential that you build the right business structure so that you can achieve all the intended goals and objectives of your business. When hiring the staff you would need, ensure that they are not only proficient but that they understand and are committed to your firm’s goals and objectives. The employees you should look to hire are; Chief Executive Officer (CEO), admin and human resource manager, business development and marketing executive, insurance sales agents, front desk officer, accountant, cleaners and security guard.

From the above analysis, you will require at least 9 key staff to ensure that your insurance brokerage firm is successful and efficient.

The Service Delivery Process of an Insurance Brokerage Company

The insurance brokerage and agency industry is one where the firm acts as an agent or broker in order to sell insurance policies as well as annuities. Operators in this industry usually earn their income from commissions which is a percentage of the premium of insurance policies that are being sold to clients. Aside from commissions, operators can also earn few income by providing risk management consulting and providing other services as well.

To be able to function and compete, operators have to be persuasive enough to get clients to purchase the insurance policies they want from them, which is why most of the operators don’t stick to a single insurance provider but as several as possible; this way they are able to advice the client on which insurance from the different providers will be more beneficial to the client.

Clients are targeted through several mediums especially as the field is getting more filled with different operators vying for the attention of these clients. Before deciding to offer insurance from various carriers, it is necessary that you conduct a thorough research into which will be more likely favored by the clients so that you do not enter into an agreement with carriers that will not be of benefit to your business.

Starting an Insurance Brokerage Firm – The Marketing Plan

  • Marketing ideas and strategies

When starting any kind of business, you should know that being able to generate money for the business is paramount and the only way this can be done is to be able to market the services of the business to your intended target market. Marketing is one of the major ways by which you can generate revenue for your business, penetrate your intended target market and also have an edge over your competitors, which is why it is necessary that you take it very seriously if you aim for your business to become a success.

Before you can however create marketing strategies that you can deem effective and successful, it is necessary that you take a thorough market survey of the industry you are about going into as this will allow you understand what niches you want to go into, who your target market is, what they expect from you, what you should expect from them as well as who your competitors are.

The insurance brokerage and agency industry is such a huge one that as an entrepreneur who is just starting out, you might find yourself overwhelmed by all the large companies that you will have to face when marketing and promoting your firm.

These large companies are not only well established, they also have a network of clients that might be hard for you to get and so if you feel the odds are against you, you might engage the services of a marketing consultant who thoroughly understands the market you are in to help create marketing strategies that will enable your insurance brokerage firm to stand out.

In addition, you can also hire marketing executives that are very proficient and align with the goals and objectives of your brokerage firm to help craft marketing strategies that are in line with your corporate marketing goals and also modify or remove ineffective marketing strategies.

Below are some of the marketing ideas and strategies that you can use to generate revenue and promote your insurance brokerage firm;

  • Introduce your insurance brokerage firm to your intended target market by sending out cold mails that state your services, contact information, as well as rates
  • Empower your marketing executives to directly market your insurance brokerage firm
  • Place adverts in local and national newspapers and magazines as well as on radio and television stations
  • Use your social media platforms such as Facebook, Twitter, Google Plus and LinkedIn to market your insurance brokerage firm
  • Attend seminars, conferences and events in order to network and promote your insurance brokerage firm
  • Ensure that your insurance brokerage business is listed in yellow pages as well as in online directories

Strategies to Boost Your Insurance Brokerage Firm Brand Awareness and Create Your Corporate Identity

As an entrepreneur, your task of getting your business established is not the ultimate; you have to get people to notice your business. One thing with publicizing your business is that you not only get the attention of your intended target market but most of the attention can be converted to sales for your business; which is why large companies do not take the issue of publicity lightly as they are ever ready to set aside a certain amount each year that will boost their brand and create a corporate identity for their business.

It is very important that you conduct a thorough survey into the market you intend publicizing your brand to as this will allow you identify what channels will be very effective in catching their attention and getting them to develop interest for your insurance brokerage firm.

Because the insurance brokerage industry is such a huge one with several well known brands, you might need to engage the services of a publicity consultant who will know how to best to project your firm to your intended target market and beyond, whilst also ensuring that you do not spend more than you would want.

Below are some of the strategies that you can use to boost the awareness for your brand and also create a corporate identity for your insurance brokerage company;

  • Ensure that you install billboards in various strategic locations in order to increase awareness for your brand
  • Place adverts in local and national newspapers and popular magazines as well as on radio and television stations
  • Distribute handbills and business cards and paste your fliers in various strategic locations around the area where your brokerage firm is
  • Create a website and use this to publicize and promote your brand. Employ an SEO expert to ensure that your website ranks tops in search engines
  • Use your social media platforms such as Facebook, Twitter, Linkedin, Google Plus and Instagram to promote your insurance brokerage firm
  • Get some of your loyal customers to help spread the word about your business
  • Participate in and sponsor some community events in order to increase awareness about your insurance brokerage firm