ON THIS PAGE
- How to Start an Insurance Company
- How Big is the Insurance Company Industry?
- What are the Key Segments of the Insurance Company Industry?
- What External Factors Affect the Insurance Company Industry?
- Who are the Key Competitors in the Insurance Company Industry?
- What are the Key Customer Segments in the Insurance Company Industry?
- What are the Key Costs in the Insurance Company Industry?
- What are the Keys to Launching a new Insurance Company?
- What are the Typical Startup Costs for a new Insurance Company?
- How much do Insurance Company Operators Make?
- Additional resources in the Insurance Company Industry
How to Start an Insurance Company
If you’re looking to start an insurance company, you’ve come to the right place since we’re going to show you exactly how to do it.
We’ll start with key insurance company industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.
Then we’ll discuss keys to not only starting an insurance company, but succeeding in it!
Before we continue, here’s where you can access your insurance business plan template since having a plan will be key to your success.
How Big is the Insurance Company Industry?
The insurance company industry has grown steadily, at a rate of 2.7% over the past five years. The 3,232 insurance companies in the U.S. collectively generated $600.8 billion in revenue last year.
What are the Key Segments of the Insurance Company Industry?
The main segments of the insurance industry are:
- Auto insurance generates the largest percentage of industry revenue.
- Homeowners insurance accounts for about 15% of total revenue
- Workers compensation and other business-related insurance accounts for about 20% of revenue
- The balance of industry revenue comes from fire insurance, other liability and other types of insurance.
What External Factors Affect the Insurance Company Industry?
A number of factors affect the performance of the insurance company industry. These drivers include:
- Number of motor vehicle registrations – The increase of vehicle registrations also means higher demand for automotive insurance policies. This year, motor vehicle registrations are rising.
- Homeownership rate – Growth in the homeowner’s insurance segment is dependent on new home purchases. This year, homeownership in the US is expected to decline.
- Natural disaster index – A high natural disaster index increases the likelihood of consumers acquiring insurance policies. However, natural disasters do occur frequently, which typically requires high pay-out for this segment.
- Yield on 10-year Treasury note – Higher interest rates mean greater income for insurance companies. But this year, interest rates on 10-year treasury notes will be decreasing.
- Regulation for the Property, Casualty and Direct Insurance Industry – State regulations affect insurance companies’ profitability. However, the regulatory environment is expected to remain stable this year.
- S&P 500 – When S&P 500 is bullish, there is higher dividend from investments for insurers. The S&P 500 is expected to increase this year.
Who are the Key Competitors in the Insurance Company Industry?
- State Farm Mutual Automobile Insurance Company
- Allstate Insurance Company
- Liberty Mutual Group Inc.
- The Travelers Companies Inc.
What are the Key Customer Segments in the Insurance Company Industry?
The customer segments in the Insurance Company industry are the commercial and private markets.
What are the Key Costs in the Insurance Company Industry?
Loss and loss adjustment expenses – At over 60%, Loss and loss adjustment expenses are by far the largest cost for industry operators.
Wages – Less than 10% of the industry revenue this year will be accounted for wages and is expected to decline in the next five years.
Other – Purchases make up a small portion of the current industry revenue; while rent, utilities, and marketing expenses account for about 3%, and depreciation is 1%.
What are the Keys to Launching a New Insurance Company?
1. Determine what you want to sell.
Identify the types of products and insurance plans that you will be offering. It is easier to start with one kind of insurance (car, health, life, pet, etc.), and offer a variety of products within that one category. This will keep your company less complicated and more manageable for you. You can expand your products and plans when you have established your company.
2. Ensure profitability.
Study the needs of your target market, then look to see what other insurance companies are serving your market. Identify insurance needs that aren’t being met by your competition.
3. Get a license.
You cannot just solicit and sell insurance products and plans without a license. Know the government requirements for being a licensed insurance agent and get licensure. Pre-licensing courses are available – either online or in a classroom setting – to help you pass the state exam.
4. Prepare your financing.
Have a specific breakdown of the cost that you will pay for the insurance company, from your license requirements and employee salaries, to the office space and equipment you will need. This will give you a clearer estimate of how much money you will need and help you assess whether you are in need of applying for business loans.
5. Have an office.
Look for an office space where you can oversee your employees and meet potential clients. Having a physical location gives your company credibility, compared with only having a website. You can minimize cost by keeping a small office with at least one conference room or finding a co-working space.
6. Market your company.
Reach out to people you know, and identify and contact potential clients. Prepare a strategy on how you will persuasively present your products and insurance plans. A memorable and professional presentation will give you an advantage over your competitors. Boost your online presence and maximize your social media accounts. This is the most effective and inexpensive tool you can use to market your business.
7. Register your business.
Find out the state regulations, and keep a checklist of steps you need to take, documents you have to submit, and licenses your state requires.
What are the typical startup costs for a new Insurance Company?
Starting an insurance company will cost you around $5,000 to $50,000 or more.
How much do insurance company operators make?
An insurance company owner makes $100,000-$126,347.
Additional resources in the Insurance Industry
For additional information on the travel agency market, consider these industry resources:
- US Federal Reserve : www.federalreserve.gov
- Property Casualty Insurers Association of America: www.pciaa.net
- Insurance Information Institute: www.iii.org
- American Land Title Association: www.alta.org
- Insurance Agency Mavericks: www.insuranceagencymavericks.com
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