Are you interested in starting an insurance company? Do you need a sample insurance company business plan template? Do you want to learn what it takes to open an insurance agency? Then I advice you read on.
Insurance is a mechanism adopted to share the financial losses that might occur to an individual or his family on the happening of a specified event. The event may be death of earning member of the family in the case of life insurance, marine-perils in marine insurance, fire in fire insurance and other certain events in miscellaneous insurance, e.g. theft in burglary insurance, accident in motor insurance, etc.
The loss arising from these events are shared by all the insured in the form of premium. Hence, risk is transferred from one individual to a group. so in this article, I will be highlighting in details how to start your own insurance company or agency.
Starting an Insurance Company – Sample Business Plan Template
1. Get licensed
To start an insurance company, you must first be licensed. That means you become an insurance agent. To start your own independent insurance company, you must have the legal right to sell financial services and insurance to the general public under the name of your registered company.
Depending on your state regulations (United states), you must have at least a minimum of $1,000,000 to $5,000,000 minimum capital to kick start. The money stated above does factor in costs for infrastructure, advertising, staffing, marketing and other expenses needed to start up your insurance company. However, this is excluding the minimum deposit or capital base you will need to startup.
In Nigeria, you will need the approval of the Central Bank of Nigeria (CBN) and the Nigerian Insurance Commission (NAICOM) before you can setup an insurance firm. You may also need to meet the minimum capital base required to open an insurance agency. All the same, just make sure you go to the right licensing agency and get the right information you need to start your business.
You also need a letter of credit from a bank or assets worth the amount you need for purchasing the insurance company license from the state licensing board. This is needed so that in case you default payment on insurance premiums, your clients can still be paid compensation as stated by state laws.
Since insurance is a service, people purchase constantly for various events in their lives, with little risk and training, you can build up a business that is profitable and also provides great service to the clients.
2. Decide on the type of insurance cover you want to offer
After deciding to start an insurance company, you must know what kind of insurance service you wish to provide for your potential clients. Insurance can be divided into three main categories:
- Assets and revenue
Some of these types of insurance are:
- Life Insurance
- Fire Insurance
- Marine Insurance
- Social Insurance
- Miscellaneous Insurance
- Personal Insurance
- General Insurance
- Property Insurance
- Liability Insurance
- Fidelity Guarantee Insurance
3. Contact insurance underwriters
Once you select the type of insurance services you want to offer, you will need to contact licensed insurance underwriters and ask them for information about becoming their representative.
You must make sure you shop around several underwriters and find the best one who suits your business idea. Also consider your location and environment when choosing the kind of insurance services you want to offer. It is advisable that you tailor your products to suit your potential clientele.
When writing a business plan for an insurance company, you need to hire a professional to write it, especially because of the fact that you would need to submit the plan before a bank and the state regulatory board, especially if you are looking for a business start-up loan.
Determine if you want the business would be run as you as partnership or corporation. Each business type has its own merits and demerits. Find the one that suits you. This also affects the kind of operating license you would be given.
Agency Licenses are given to Corporations, Limited Liability Companies (LLC) and Partnerships. Sole Proprietors are often issued Individual Licenses. You must ensure that whatever license you hold is what you do business with; failure to do so would be met by the law.
Here are some basic terms used in the insurance business that you need to be familiar with:
- Agent: Someone who represents one insurance company and sells its insurance products. In some cases, a life insurance agent may represent several different insurance companies. Agents must usually be licensed in the province or territory in which they do business.
- Claim: Official notice you provide to your insurer requesting to be paid for a loss or event covered by your insurance policy.
- Claim investigation: A process used by insurers to get the claim information necessary in order to decide whether to pay a claim.
- Coverage: The amount of protection you have purchased. The maximum amount of money the insurance company will pay you if you make a claim for a loss or event covered by your policy.
- Deductible: Amount of your claim that you agree to pay before the insurer pays the rest. Choosing a higher deductible will decrease the cost of your insurance premiums because you agree to pay for a larger part of your loss. This term may be used with health, dental, home and auto insurance policies.
- Insured: Person(s) protected by the insurance policy.
- Insurer: Insurance company that issues the insurance policy (in this case that would be your company).
Your office should be located in an area that is both professional and well-maintained. Inside the office should be neat with private offices, a conference room and a reception area.
Most insurance offices are often located in the business districts that can easily be located by clientele. Insurance business sometimes is all about the appearances and the impression created. How you look inspires clients to stay and do business. No one wants to buy insurance from a shady looking person in a dingy office.
Insurance is a service and like every other service, so it must be properly marketed in order to increase sales and profit. Most people buy their insurance from insurance agents, insurance brokers or the insurance company itself. Most insurance companies market their services through networking, e-mail marketing, print media, direct mail and calling individuals directly.
Have you considered starting an insurance company? Or looking for a way to invest in an insurance firm? Then, consider these tips and take action. You won’t know it works unless you try.