How to start an insurance agency: Building an insurance company
Learning how to start an insurance agency could be an excellent idea for an ambitious, would-be entrepreneur. While insurance might not be the sexiest industry, it’s one of the most stable sectors to build a company. After all, virtually everyone needs some kind of insurance.
The global insurance market grew by about 10% in 2022, reaching a value of $6 trillion. This means there’s still plenty of money to be made in the sector if you know where to begin. Plus, there are various niches to explore within the insurance landscape too.
If you want to give families protection and peace of mind, you could create a life insurance company.
If you wanted to combine your love of finance with your appreciation of the automotive sector, you could consider brokering car insurance.
Today, we will explore some key steps involved in starting an insurance agency, developing your brand, and making your venture a success.
Starting an agency: What you need to know
There are two common ways to create an insurance company. The first option is to use your own financial resources to deliver backing to a customer. This means you agree to pay your customer a certain amount if they make a claim in exchange for a monthly fee.
This is the easiest way to “own” an insurance agency outright and maintain more control over your business.
However, it does put you at significant risk during the early stages of launching your company.
You’ll need to have a financial pot available to make payments to any customer who claims on their insurance. This could mean you need to invest hundreds of thousands of dollars into your brand from day one or get the support of various investors and shareholders.
The other option is to become an insurance broker. This essentially means you don’t offer the coverage provided to customers yourself. Instead, you assist customers in choosing the right insurance provider for their needs and earn a commission for every client you send to a business.
While brokerage is a cheaper way to start making money in the insurance landscape, you don’t have full control over the insurance service. You’re really just acting as a “middle man.”
How much money do you need to start an insurance agency?
All businesses require some startup capital. The funding you need for your insurance agency will depend on how you plan to structure and run the company. If you want to give customers large cash payments whenever they make a claim, then you’ll need access to a lot of funds.
You won’t need quite as much money if you’re simply working as a broker.
What do you need to own an insurance agency?
Learning how to start an insurance agency can be complex.
Getting involved in the insurance landscape isn’t as simple as opening your own e-commerce business or monetizing blog posts online. You’ll need specific licenses and protections and relationships with the right financial groups to ensure you can serve your customers.
The most important things you’ll need to get started with your own agency are:
Even if you’re already a licensed insurance agent, you will still need additional licenses to start an insurance agency. Your municipality’s local website should have some basic information on applying for this licensure.
To ensure you have all the right documentation for running your own business, you’ll need to register with your state government and get a Tax ID number.
All companies generally need some form of insurance – even insurance agencies. When you’re learning how to build an insurance agency from scratch, it’s worth talking to a legal professional about the kind of protection you might need.
Most of the time, you’ll require at least “Business Owner Policy liability coverage,” particularly if your business is a sole proprietorship.
Depending on where you’re launching your business, you may also require Professional Liability insurance or Errors and Omissions insurance to register your business.
As mentioned above, you will require at least some funding to launch your insurance agency.
You may be able to get a business loan for the cost of some of the initial setup. However, it may also be worth looking into additional funding opportunities for your business from investors, partners, and potential shareholders.
How to create an insurance company: The first steps
Once you have the initial licensure, funding, and insurance required for your insurance agency, it’s time to start working on bringing your business to life. There’s no one-size-fits-all strategy to starting an insurance agency, but most professionals will begin with these steps:
Step 1: Choose your niche
Insurance comes in many different forms. This means you have many options available when you’re deciding what kind of insurance company to launch. Choosing a niche will make it easier to define who your target audience is going to be and who your competitors are.
Ask yourself what kind of insurance appeals most to you. If you already have experience in a specific industry, such as health, travel, or business, you might want to stick to those areas. Notably, most forms of insurance are quite lucrative, so you should have plenty of options.
Step 2: Write a business plan
Plans make achieving your goals a lot easier. Although writing a business plan can seem like a relatively time-consuming process, it’s an important part of making sure you have a vision you can follow for establishing and building your new agency.
A business plan will also show your professionalism to any potential stakeholders, such as insurance carriers, investors, and employees. Your business plan can be adjusted and updated over time.
However, at the beginning of launching your company, your document should at least:
- Introduce the individuals involved in running the business.
- Explain a plan for acquiring customers.
- Outline the services you’re going to provide (types of insurance).
- Identify your target audience, suppliers, and competitors.
- Analyze your risks and opportunities.
- Highlight your unique selling point (what makes you different).
- Include an initial budget for starting your insurance agency.
Step 3: Choose your agency’s name
Choosing a name for your agency is one of the first things you’ll need to do when learning how to start an insurance agency. You’ll need an official name to register your company with the government and receive the right tax documentation.
However, your name isn’t just a legal requirement; it’s also a valuable tool for helping you reach customers.
Many sole proprietors choose to name their insurance company after themselves, while larger companies experiment with invented terms and portmanteau names.
You’re free to choose any name that you think resonates with your target audience; just make sure the title is:
- Unique and available (not already trademarked).
- Easy to say, spell, and remember
- Compliant with any industry requirements
- Meaningful (conveys your agency’s benefits)
- Simple and straightforward
Keep in mind that some states will prohibit using certain words that may be deemed deceiving or misleading to the public, so it’s worth doing your research before you pick a title.
How do you structure an insurance agency?
One important thing worth considering when figuring out how to start an insurance agency is how you will structure your new company. There are various ways to start any business, from launching a “sole proprietorship” to creating a partnership or limited liability company.
You can also consider creating a corporation or “S corporation.”
Each business structure has its own specific risks and benefits to consider.
The sole proprietorship business model is the simplest structure but carries the greatest personal liability. This means if something goes wrong with your business, you’re the one who will have to deal with the aftermath. If you’re sued, your personal assets are also at risk.
LLCs and corporations offer a legal distinction between your business entity and you. They’re more complex and costly to run, but they do give you better protection for your personal assets. You can find some useful insights into how to structure your business here.
How to build an insurance agency: Branding and marketing
Once you’ve defined your business structure and determined what kind of insurance company you will run, the fun begins. Learning how to start an insurance agency isn’t just about getting the paperwork right. You must also invest in branding and marketing strategies to help you grow.
The right brand is how you build deeper connections with your target audience, encourage loyalty, and differentiate yourself from other companies offering similar services.
Here are the core elements you’ll need to get in place to ensure you can grow your company:
1. A brand image
Every brand needs a recognizable image. This means you’ll need to select and create assets that visually represent your insurance agency’s core selling points and values.
You’ll need an eye-catching logo, as well as a set of brand colors that help to connect to your audience on an emotional level. Colors like blue are common in the insurance sector, as they’re associated with reliability.
If you’re creating a physical office for your insurance company, you’ll need to ensure the signage and various other elements look professional and credible. It’s also crucial to have an eye-catching and easy-to-use website.
Your website will help your customers learn more about you and give them the details they need to contact you for your services.
2. A brand personality
Once you have your brand image, it’s important to consider your personality. In other words, what kind of things do you want your customers to think and feel when they interact with your brand?
What will your tone of voice sound like when you’re producing marketing materials or connecting with your audience face-to-face? What terminology will you use?
When you own an insurance agency, opting for a sophisticated and professional tone of voice is generally a good idea. While you can have a friendly vibe when interacting with clients, the most important thing you can do is give them peace of mind.
Let them know they can trust you by presenting yourself as an expert in your field.
3. A marketing strategy
Finally, you’ll need a way to make your customers aware of your brand and services. This means promoting your business in as many different ways as possible.
From the moment you start an insurance agency, you should look for ways to expand your brand reach. This could mean investing in content marketing and SEO strategies, so your customers can easily find you online.
You could also consider building a presence on social media, specifically focusing on the channels you know your customers use most. Some insurance companies also invest heavily in local marketing practices.
For example, radio and other offline formats can be particularly valuable if you want to connect with a smaller audience closer to your specific geographical region. Experiment with multiple marketing strategies to discover what works best for you.
Opening an insurance agency: Top tips
If you’ve been following the steps outlined above, you should be on the right track towards starting your own insurance brand. However, similar to running any business there are some steps you can take to improve your chances of success.
Before you dive into opening an insurance agency, it’s worth keeping these tips in mind:
1. Know your audience
Getting to know your target audience is one of the most important things you can do when starting any business. Customers want solutions that are tailor-made to them. This is particularly true for consumers searching for protection and support in the form of insurance.
Start by identifying what kind of customers you will be looking at. For instance, are you planning on selling insurance to businesses or to customers directly? Do you want to focus on a specific sub-section of the market, such as small businesses or retired individuals?
Once you have a clear view of who your audience will be, create a buyer persona, which will help guide your marketing and branding strategies going forward.
2. Take advantage of data
The right data can be an incredibly useful resource for an insurance company owner. When you’re first deciding what kinds of policies and support to offer your customers, you can use market data to determine what your clients need and what your competitors already provide.
When you start serving clients, you’ll also be able to leverage data to help you make better decisions about growth. For example, you can track renewal rates among different customer groups and segments to help you determine which offers are most likely to help you build your profits.
Data can also help you strengthen client relationships and improve your marketing strategies as you build your insurance company. For example, you might learn you get more renewals and customer loyalty after investing in email updates and social media campaigns.
3. Focus on both existing and new customers
When you’re working on developing your insurance agency, your main focus may be on finding as many new customers to add to your roster as possible. However, while finding new clients is critical, maintaining positive relationships with your existing ones is just as important.
After all, insurance is a long-term purchase. This means you want your clients to stay with you and renew their service for as long as possible. In some cases, experts even believe that 80% of any company’s future profits come from just 20% of its existing customers.
To maintain excellent relationships with your clients, always commit to phenomenal, fast-paced, and personalized service. Strive to address your clients’ needs, and pay attention to any feedback they give you.
4. Work on boosting market access
While finding and retaining clients is crucial for a growing insurance company, it’s also important to take steps to increase market access where possible. This means ensuring you have access to the right sources of insurance and coverage for your target audience.
If you don’t have access to the right markets, you won’t be able to provide nearly as many products and quotes from different carriers as your competition. This could mean your clients switch to a different agency to find a better deal.
A good way to improve market access is to partner with an insurance agency alliance relevant to your local area and niche. This will give you access to a wider range of partners you can work with to expand your service portfolio.
5. Join an insurance agency network
Speaking of expanding your reach, you might also find joining an “Agency network” helpful to improve your growth potential. An agency network will give you access to new potential partners and resources you can use to expand your service offering even further.
There are even some agency networks available that offer increased market access and profit-sharing options.
Check out the agency alliances and networks in your region. Look for the options most likely to help you maximize your revenue, improve your client retention rate, and ensure you can branch out into different services and solutions.
The broader your coverage is, and the more support you have from the right partners, the faster you’ll be able to grow.
Is an insurance agency profitable?
Learning how to start an insurance agency can take significant time and effort.
With that in mind, ensuring you can make a consistent profit with your new organization is important. When you start an insurance agency, it’s worth researching to answer the question, “how do insurance agency owners make money?”
Brokers can earn cash in the form of a commission awarded every time they send a new client to another insurance business. Alternatively, if you’re offering financial protection to customers directly, you’ll earn money from every insurance premium your customers pay.
You’ll keep their premium as long as customers don’t claim on their insurance policies.
Depending on the kind of insurance company you want to build, you may be able to make some additional money by offering bonus services, such as consulting and guidance.
Are you ready to create an insurance company?
If you’re interested in earning a living in the financial sector and know a lot about insurance, learning how to start an insurance agency can be profitable. The key to success is taking the right amount of time to research and ensure you’re targeting the correct audience.
If you focus on finding the right customers, make sure you set yourself apart from the competition with the correct branding, and deliver amazing customer service, you should be able to make a consistent income.
If you need extra help building your insurance agency, it’s always worth seeking extra support from a branding or marketing company.
Fabrik: A branding agency for our times.