Do you want to start an auto insurance company? If YES, here is a complete guide to starting an auto insurance business with NO money and no experience.
Okay, so we have provided you an in-depth sample auto insurance business plan template. We also took it further by analyzing and drafting a sample auto insurance marketing plan backed up by actionable guerrilla marketing ideas for auto insurance companies. In this article, we will be considering all the requirements for starting an auto insurance business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- 1 Why Start an Auto Insurance Company?
- 2 Starting an Auto Insurance Company – Market Research and Feasibility Studies
- 3 Starting an Auto Insurance Company – Legal Matters
- 4 Is Professional Certification Needed to Run an Auto Insurance Company?
- 5 Starting an Auto Insurance Company – Technical and Manpower Details
- 6 Starting an Auto Insurance Company – The Marketing Plan
Why Start an Auto Insurance Company?
One of the breakthroughs in technology several centuries ago was the automobile. Over the centuries, we have seen various and uncountable evolvement of automobiles. There has also been a rise in several businesses that revolve around the automobile industry.
In as much as people still make use automobiles on our roads, the need for auto insurance policy cover will continue to be in demand. Auto insurance business is indeed a profitable business because you are not allowed to drive any vehicle in the United States and in all countries of the world without the appropriate insurance policy cover.
If you are looking for a business to start as an entrepreneur and you know you have an interest in the insurance industry, then you should consider starting your own auto insurance business. If you are considering starting an auto insurance company, then you would be required to get an insurance license from the organization regulating the insurance industry in your country before you are permitted to start your own auto insurance company. In the United States of America, it is The National Association of Insurance Commissioners that regulates the industry.
It is important to point out that auto insurance business is one the businesses that can’t go out of fashion because of the role it plays in the auto industry. Depending on the scale you want to start, the startup capital for this type of business can be considered to be moderate. As a matter of fact, you can start your own auto insurance business with a handful of employees and then grow it big within a short period of time by re – investing your profits back to the business.
It is also important to state that if you are an investor who is interested in owning a portfolio in the insurance industry, you may not need to go all the way to write and pass the required insurance exams and obtain the necessary insurance certifications. All you need to do is to provide the finance and connections needed and then get people who have the required papers/documents to partner with in starting your auto insurance company.
So, if you have the desires to start your own auto insurance business, all you need do is to read this article and you will be well equipped. You can start your auto insurance business from a small town in the United States and if you are consistent and creative, it won’t be too long before your brand becomes a nationally recognized brand.
Starting an Auto Insurance Company – A Complete Guide
- Industry Overview
The auto insurance industry comprises of firms that underwrite, or assume the risk and assigns premiums for auto insurance policies. Automobile insurance basically provides financial protection against physical damage to automobiles and bodily injuries resulting from traffic collisions. It is worthy to mention that automobile insurance can also protect against resulting liability.
If you are a close watcher of the Automobile Insurance industry, you will agree that the industry has an intensified focus on financial positions and net premium growth for liability insurance products that have aided the Automobile Insurance industry over the years.
Going forward, the revenue generated by the auto insurance industry is projected to increase due to continued improvements in the macroeconomic landscape, which are anticipated to benefit investment conditions for auto insurers.
This is due to the fact that the majority of auto insurer assets are invested in bonds. Despite this trend, consolidation in the industry is expected to continue, with larger operators viewing strategic acquisitions as a lucrative method to expand their share of the auto insurance market.
The Automobile Insurance Industry is indeed a large industry and pretty much active in all the countries of the world. Statistics has it that in the United States of America alone, there are about 5,420 registered and licensed large and small – scale automobile insurance companies scattered all across the United States responsible for directly employing about 224,705 people and the industry rakes in a whooping sum of $228 billion annually.
The industry is projected to grow at 2.8 percent annual growth between 2011 and 2016. It is important to state that Allstate Insurance Company, Berkshire Hathaway Inc., Progressive and State Farm have the lion share of the available market in the industry.
A recent report released by IBISWorld shows that the performance of the Automobile Insurance industry over the five years to 2016 was aided by a hardening insurance market in the latter half of the period and growth in net premiums written for each of the industry’s product lines, particularly its liability insurance offerings. The report also revealed that during a hard market, insurers focus on shoring up their financial positions and, in doing so, increased premium rates.
However, price competition remains a crucial basis of competition within the industry, with the dichotomy of traditional and online-focused discount insurers becoming increasingly important. Moreover, this competitive industry continues to follow the broader insurance sector’s consolidation trends, as auto insurers make strategic acquisitions to grow market share.
In some countries, trust is one of the key factors that is hampering the growth of the insurance industry. Beyond that, the insurance company is still growing and as long as the economy of the country continues to grow, the auto insurance company will usually tag along.
The fact that there are several auto insurance companies and insurance brokerage firms does not in any way stop an investor or entrepreneur who wants to venture into the auto insurance industry. If you know what you want and you have the right strategy, you will definitely make good success out of the auto insurance industry.
People are encouraged and motivated to venture into the auto insurance industry because of the profitability of the industry, and also because despite the fact that the industry is saturated, there is still room to create your own unique auto insurance products or even partner with bigger insurance companies if you are able to successfully build your own auto insurance company to a certain success level.
Lastly, the automobile insurance industry is pretty much open to as many people that are interested in the industry as long as you have what it takes to run an insurance firm. Even if you don’t have the finance and other requirements for starting an auto insurance company, you can come into the industry by starting – out as an accredited auto insurance broker.
Starting an Auto Insurance Company – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who patronize auto insurance policies cut across all genders above 18 years with the financial means, and who own automobiles, hence the demographic composition of the auto insurance business is all encompassing. In essence, your target market can’t be restricted to just a group of people, but all those who own automobiles.
So, if you are thinking of launching your own auto insurance company then you should make your target demographics all encompassing. It should include auto dealership garages, car owners, auto repair, maintenance and servicing garages, transport companies and haulage companies in and outside the neighborhood where your auto insurance company will be located.
List of Niche ideas Within the Auto Insurance Industry That You Can Specialize in
It is important to state that there is no known niche area when it comes to the auto insurance business; auto insurance is a niche area in the insurance industry. Every player in this line of business directly engages in underwriting private passenger liability insurance, private passenger collision/comprehensive insurance, commercial liability insurance and commercial collision/comprehensive insurance et al.
The Level of Competition in the Auto Insurance Industry
The competitions that exist in the automobile insurance industry go beyond competitions with auto insurance companies; you will be expected to compete with insurance companies that also sell auto insurance policy cover. So, it will be right to say the competition in the auto insurance line of business is tough.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your products or business properly, you will always make headway in the industry. Just ensure your premiums are affordable, you pay claims as at when due without much stress on the part of your clients and you know how to attract and reach out to your target market.
But over and above, there are several auto insurance companies scattered all around the United States. As such, if you choose to start your own auto insurance company in the United States, you will definitely meet stiffer competition amongst auto insurance companies and insurance companies within your business location that also sell auto insurance. Besides, there are larger auto insurance services that determine the trends in the industry and you should be ready to compete with them for customers.
List of Well – Known Brands in the Auto Insurance Industry
In every industry, there are always brands that perform better or are better regarded by customers and the general public than the others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading auto insurance companies in the United States of America and in the globe;
- Allstate Insurance Company
- Berkshire Hathaway Inc.
- Progressive Auto Insurance Company
- State Farm Auto Insurance Company
- USA Insurance Co
- Auto Insurance America
- Wilcox Family Insurance
- Amica Mutual Insurance Company
- American Family Insurance – Tom Moody
- Com Auto Insurance Agency
- Wawanesa Assurance
- Dunn Insurance
- US Agencies Insurance
- Insurance Connection USA
- Auto Insurance America
- Parsons, Dan – Nationwide Insurance
- Geico Auto Insurance Company
- Liberty Mutual
- AAA Auto Insurance Company
If you are looking towards successfully launching a business and maximizing profits, then you need to ensure that you get your economic and cost analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
Auto insurance business is not a green business; as a matter of fact, you will come across several auto insurance companies when you drive through town or search both online and offline directories. So, if you are mapping out your economic and cost analysis, you should carry out thorough market survey and costing of the amount needed in renting an office facility, furnishing the office, building software apps, the amount needed as capitalization fund, the amount needed to acquire the required business licenses and also the cost to successfully run the business.
Over and above, if you are considering starting an auto insurance company, then your concern should not be limited to the cost of renting an office facility, furnishing the office etc, but also on branding and on how to build a robust clientele base. The truth is that if you are able to build a robust clientele base, you are sure going to maximize profits in the business.
Starting Your Auto Insurance Business from Scratch vs Buying a Franchise
There is no hard and fast rule when it comes to choosing how you intend starting a business. Basically, you should be guided by your overall business vision and mission statement. If you are looking towards starting an auto insurance company, you would have to start from the very scratch because you can hardly get the franchise of an auto insurance company to buy.
Besides, starting an auto insurance company especially an auto insurance brokerage agency from the scratch is less stressful when compared to other related businesses which usually require detailed groundwork before launching the business.
With an auto insurance company, you should just try as much as possible to secure a standard office facility in a good business district and then leverage on every marketing tool within your disposal especially the internet to market your auto insurance company.
Please note that most of the big and successful auto insurance companies around started from the scratch and they were able to build a solid business brand.
Possible Threats and Challenges You Will Face When Starting an Auto Insurance Company
If you decide to start your own auto insurance company today, one of the major challenges you are likely going to face is the presence of well – established auto insurance companies and insurance companies within your business location that also sell auto insurance policy covers. The only way to avoid this challenge is to create your own market.
Some other challenges and threats that you are likely going to face is economic downturn; if the economy is in bad shape, businesses such as auto insurance company companies and the likes usually struggle to get their customers to pay premium, maintain their old customers or even welcome new customers.
So also, unfavorable government policies can also hamper the growth of your auto insurance company. There is nothing you can do as regards these threats and challenges other than to stay positive that things will work well for you.
Starting an Auto Insurance Company – Legal Matters
- Best legal entity to use for this type of business
Generally, you have the option of either choosing a general partnership or limited liability Company for an auto insurance company. Ordinarily, general partnership should have been the ideal business structure for a small – scale auto insurance company especially if you are just starting out with a moderate startup capital in a small neighborhood.
But people prefer limited liability Company for obvious reasons. If your intention is to grow the business and sell your auto insurance policy covers in major cities across the United States of America and other countries of the world via franchising, then choosing sole proprietor is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your auto insurance company; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your auto insurance company with the ability to sell franchise and sell your auto insurance policy covers all across major cities in the United States of America, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Catchy Business Name ideas Suitable for an Auto Insurance Company
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own auto insurance company, here are some catchy names that you can choose from;
- Vicar Mica® Auto Insurance Company, Inc.
- Bourn Mort® Auto Insurance Company, LLC
- Classique Policies™ Auto Insurance Company, Inc.
- All Autos® Auto Insurance Company, LLC
- Mark Festus Group® Auto Insurance Company, Inc.
- Tennessee Ribbon® Auto Insurance Company, Inc.
- C – Plus™ Auto Assurance Company, Inc.
- Guaranteed Autos® Auto Insurance Company, LLC
- Ken Garland and Family® Auto Insurance Company, Inc.
- Mutual Contract® Auto Insurance Company, Inc.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own auto insurance company in the United States of America;
- General insurance
- Risk Insurance
- Credit insurance
- Deposit insurance
- Financial reinsurance
- Lenders mortgage insurance
- Health insurance
- Liability insurance
- Comprehensive Motor Vehicle Insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
Beyond every reasonable doubt, starting an insurance company is indeed a serious business which is why you must do all you can to dot the ‘I’s and cross the‘t’s. One of the things you need to do is to file for intellectual property protection.
This is necessary because you must ensure that you company’s logo and every other official document like auto insurance policy document and claims related documents are well protected to guide against people taking advantage of the fact that they are not protected.
So also, you may want to develop your own customized auto insurance software applications; if you happen to develop your own customized software application, then you would need to apply for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Lastly, there may be need for you to also develop unique auto insurance products for your clientele base. The fact that there are stiff competitions in the auto insurance industry requires that you protect your brain child or else others will leverage on it.
Is Professional Certification Needed to Run an Auto Insurance Company?
Aside from the results you produce as it relates to paying claims as at when due, professional certification is one of the main reasons why some auto insurance companies stand out. If you want to make an impact in the automobile insurance industry, you should work towards acquiring all the needed certifications in your area of specialization.
You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. Certification validates your competency and shows that you are highly skilled, committed to your career and up-to-date in this competitive market.
These are some of the certifications you can work towards achieving if you want to run your own auto insurance company;
- Certified Insurance Counselors (CIC)
- Associate in Claims (AIC)
- Associate in Insurance Services (AIS)
- Associate in Personal Insurance (API)
- Accredited Advisor in Insurance (AAI)
Please note that if you are an investor who is interested in owning a portfolio in the insurance industry, you may not need to go all the way to write and pass the required insurance exams and obtain the necessary insurance certifications. All you need to do is to provide the finance and connections needed and then get people who have the required papers/documents to partner with in starting your auto insurance company.
List of Legal Documents You Need to Run an Auto Insurance Company
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own auto insurance company in the United States of America;
- Certificate of Incorporation
- Business License
- Tax Payer’s ID / Tax Identification Number
- Business Plan
- Proof of ownership, proper identification and vehicle license
- Fire certificate
- Non – disclosure Agreement
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
Financing Your Auto Insurance Company
Starting an auto insurance company can be cost effective especially if you choose to start on a small scale as an auto insurance brokerage agency. Renting an office facility, furnishing the office, building software apps and the amount needed as capitalization fund, and the amount needed to acquire the required business licenses are part of what will consume a large chunk of your startup capital. So if you choose to start the business on a large scale, you would need to go source for fund to finance the business because it is expensive to start a standard large – scale auto insurance company.
No doubt when it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your auto insurance company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Suitable Location for an Auto Insurance Company
Insurance companies and most financial services based type of businesses require that you see physically with your clients, hence it must be located in a good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business.
So, if you are looking for a location for your auto insurance company, ensure that it is in a place that is located in a business district in your city, a place that is visible and easily accessible. Of course, you would not want to locate this type of business in the outskirts of town. Your clients should be able to drive down and locate your office with little or no difficulty. Vendors also should be able to easily locate your office when they have to come submit their bid/proposals, documents or for background checks et al.
Most importantly, before choosing a location for your auto insurance company, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across a similar business that just closed shop in the location you want to open yours can’t be ruled out. This is the reason why it is very important to gather as much facts and figures before choosing a location to set – up your own auto insurance company.
These are some of the key factors that you should consider before choosing a location for your auto insurance company;
- The demography of the location as it relates to the number of automobiles
- The demand for auto insurance policy covers in the location
- The purchasing power of residents of the location
- Accessibility of the location
- The number of auto insurance companies and insurance companies that also sell auto insurance policy covers in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
Starting an Auto Insurance Company – Technical and Manpower Details
If you are considering starting an auto insurance company, then you should look towards hiring ICT experts to help you develop your own unique insurance related software application, secured internet platform and online payment system (that will help you facilitate easy payment of premiums).
These are some of the technical stuffs that you must be ready to sort out before successfully launching your insurance company. So also, you will definitely need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
As regards leasing or outright purchase of an office facility, the choice is dependent on your financial standing, but the truth is that to be on the safe side, it is advisable to start off with a short – term rent/lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property but if not, then move on and source for other ideal location/facility for such business.
When it comes to hiring employees for a standard auto insurance company, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Risk Manager, Claims Investigators, Sales and Marketing Officer/Sales Girls and Sales Boys, Accounting Clerk and Customer Service Executives.
These are some of the key employees that you can work with. You may need a minimum of 10 staff members working full time to start an insurance brokerage firm, but if you are looking towards starting a small – scale standard insurance company, then you should make provision for over 10 full – time employees that will help you man key roles in your organization.
The Services Process Involved in an Auto Insurance Company
When it comes to an auto insurance company, there are no hard and fast rules as regard how they carry out their services. This is so because the business process is simple and straightforward.
Basically, an auto insurance company lists the policy covers that they have and then go out there to market the policy covers. Modalities on how to regularly collect premiums and also pay claims as at when due after due claims investigation has been conducted, should be put in place.
It is important to state that an auto insurance company may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated auto insurance company business process is not cast on stone.
Starting an Auto Insurance Company – The Marketing Plan
- Marketing ideas and strategies
Generally, running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch an auto insurance company, then you must go all out to employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands determining the market direction for the automobile insurance industry.
Automobile owners will purchase your auto insurance policy cover from you if they know that they are going to get claims as at when due and of course value for their money (premiums).
As a matter of fact, your marketing strategy will center on reliability, swiftness, safety, pricing, secured payment platform, and above all excellent customer service. You should ensure that whenever your customers purchase your insurance policy cover, they will get excellent service. The truth is that if you are able to put the above stated in place, you won’t struggle to retain your old customers and at the same time win over new customers.
Businesses these days are aware of the power of the internet and which is why they will do all they can to maximize the internet to market their services. In other words, a larger percentage of your marketing effort will be directed to internet users; your website will become your number one marketing tool.
These are some of the marketing ideas and strategies that you can adopt for your auto insurance company;
- Introduce your auto insurance company by sending introductory letters alongside your brochure to auto dealership garages, car owners, auto repair, maintenance and servicing garages, transport companies and haulage companies and other key stake holders throughout the city where your auto insurance company is located
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across, so that those on the social media or those who read blogs can know who to call when they need to buy auto insurance policy covers within your location
- Create a basic website for your business so as to give your business an online presence
- Directly market your products
- Engage in road shows in targeted communities from time to time to promote your auto insurance company
- Join local auto insurance associations for industry trends and tips
- Provide discount days for your customers
- Advertise your business in community based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word of mouth marketing (referrals)
Strategies to Boost Your Auto Insurance Company Brand Awareness and Create Your Corporate Identity
If your intentions of starting an auto insurance company are to grow the business beyond the city where you are going to be operating from to become a national and international brand by selling your insurance policy covers all across the United States, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your auto insurance company;
- Place adverts on both print (newspapers and auto magazines) and electronic media platforms
- Sponsor relevant community based events
- Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your products
- Install your Bill Boards on strategic locations all around highways and major roads in your city or state
- Engage in roadshows from time to time in targeted neighborhoods to create awareness of your auto insurance company
- Distribute your fliers and handbills in target areas
- Contact auto dealership garages, car owners, auto repair, maintenance and servicing garages, transport companies and haulage companies and other key stake holders throughout the city where your auto insurance company is located informing them about your business and the products you sell
- List your auto insurance company in local directories
- Advertise your auto insurance company in your official website and employ strategies that will help you pull traffic to the site
- Position our Flexi Banners at strategic positions in the location where your auto insurance is located
- Ensure that all your staff members wear your branded shirts and all your vehicles and vans are well branded with your company logo et al.
It is advisable that you enter into business partnership with key stakeholders in the automobile and transportation industry most especially auto dealership garages, car owners, auto repair, maintenance and servicing garages, transport and haulage companies and other key stakeholders et al; they are in better positions to purchase auto insurance covers from you.
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