How to Start a Auto Insurance Business

Auto Insurance as a Business

The number of car enthusiasts and car owners is constantly increasing, which means that auto insurance services are becoming more and more in demand. It is important for a potential founder of an auto insurance business to know the basic nuances operating in this field, as well as the most important steps needed to establish an insurance agency.

Auto Insurance: The Nuances of the Business

If you want to start a business related to auto insurance, it is important to understand the differences between the concepts of an insurance company and an agency. In addition, it is necessary to immediately determine the areas of the insurance business that are of interest to the future owner of such a business. Thus, it can be a full-fledged insurance company specializing in concluding insurance contracts, and in addition, the scope of such a company will include the implementation of payments under the contracts. The creation of such an organization requires the presence of significant charter capital. A simpler step for beginners would be to open a branch of an insurance company. For example, you can create an agency whose activities will be based on the provisions of the agency agreement on cooperation. There is also a possibility of opening a franchise business, which is also subject to some special rules.

How to become a car insurance agent?

You can start a car insurance business completely without any start-up capital or your own investments. Many entrepreneurs start out as insurance brokers, working with specialized companies for a commission to help customers choose the right insurance product. The difference between a broker and an agent is that the former does not represent the interests of any party, but simply performs the functions assigned to him by the insurer or the insured, in exchange for a certain cash compensation.

The main services provided by insurance brokers are as follows:

Advice on the choice of insurance company;
Consulting assistance in the process of drawing up contracts;
Assistance in selecting the most suitable and advantageous insurance product.

If the insurance broker's client requires contract modifications or other accompanying services, such activities will also be the responsibility of the insurance specialist.

Insurance agent:

An individual;
A representative of several or one insurance company;
A trusted person who protects the rights and interests of the insurer, but whose duties do not include the payment of monetary compensation in the event of an incident specified in the insurance contract;
Advises potential clients and sells insurance contracts.

Insurance broker:

A legal entity (insurance company);
Must have a license to perform activities related to the conclusion of insurance contracts;
A representative of the insured - protects the client's interests before insurance companies and other authorities (courts, expert organizations);
An intermediary (not an employee of any insurance company);
An intermediary (not an employee of any insurance company);
A company that negotiates contracts with various insurance companies, protecting the interests of the client and offering him the most favorable option of the given contract;
A company that settles claims in the event of a claim.

In order to start a car insurance brokerage business, the following steps must be taken:

Decide which companies are suitable for cooperation;
Prepare the necessary founding documents;
Offer your services to specialized companies and select the appropriate products for further work;
Sign the agency contract.

In order to carry out this type of activity, it is not necessary to register as a private entrepreneur, but only to present identification documents. However, in order to ensure smooth reporting to the tax authority, it is desirable to register as a private entrepreneur.

Among the important features that the broker should pay attention to is the necessity of obtaining a license for this activity.

There are several important advantages of working as a broker without establishing a full-fledged company. First of all, there is no need to rent an office and purchase all the necessary equipment and office supplies. In addition, there is no problem of hiring employees and paying their salaries. It is true that opening a successful agency offering car insurance services, you can count on higher profits and the possibility of expanding the company.

Algorithm of opening an insurance agency

Experienced insurers eventually decide to go beyond simple consulting and intermediary activities and open their own agency specializing in car insurance.

Establishing an insurance agency, the main activity of which will be to advise individuals and legal entities on the best option for car insurance for a certain financial compensation, is a little more difficult, but this activity does not require significant expenses. You can start establishing such an agency by registering as a sole proprietor.

The advantage of this type of business is a minimum of initial investment and, accordingly, risks.

The opening of an agency includes the following steps

Obtaining the status of individual entrepreneur, for which the candidate is sent to the Tax Service, providing all the documents required by its specialists;
Selection of companies suitable for further cooperation. The selected companies are then asked to sign an agreement;
Searching for premises to accommodate the agency, purchasing furniture, computer and office equipment, concluding contracts with utilities;
Hiring the required number of employees, if necessary we will have to start training the staff;
Organization of advertising of a new agency, for greater efficiency for this purpose is desirable to contact professionals in the field of marketing, as well as to do Internet promotion company advertising.

Profits that the agency will receive, and therefore its founder, depends mainly on how effective the work of specialists, because the company's income, in fact, will be the interest rate of all issued by the agency insurance policies.

Characteristics of opening an insurance company

The establishment of an insurance company will be the most expensive and time-consuming of all possible options for car insurance. Since such activity is strictly regulated by special laws, the future owner of such an enterprise must first study the existing legal framework.

The first imperative rule is to create a legal entity. For this purpose, the new company should be registered with the tax authority in the manner prescribed by law.

The next mandatory step is to obtain an appropriate license, which is handled by the Insurance Market Department. In order to obtain a license to open an automobile insurance company, certain documents must be submitted to the licensing authority. It is also important that the licensee meets these basic requirements:

Have a work experience in insurance activities (including CASCO and MTPL) of 2 years. In order to acquire sufficient experience, it is recommended to start the motor insurance business by opening an agency or working as an insurance broker;
Availability of access to the systematized system of compulsory insurance;
Valid membership in the National Union of Automobile Insurers.

In addition, the licensing process also draws attention to the availability of minimum authorized capital, which must be fully paid at the time of registration.

Another important rule - in order to ensure financial stability, a company engaged in automobile insurance must have a wider range of services. Thus, MTPL and Casco should not exceed 50% of its premiums from the total insurance portfolio.

Rules for Opening a Sole Proprietorship

Generally, individuals begin their auto insurance business by forming a sole proprietorship. For those starting a business from scratch, it is important to know the sequence of steps to obtain this status.
First of all, it is necessary to choose an appropriate tax regime, guided by the existing legislative documents. Then, in the proposed form, indicate the OKVED codes corresponding to the chosen type of activity.
The next important step is to submit an application to the tax authorities in accordance with the established form and to pay the standard state duty. It is important to have photocopies of your personal documents, a receipt confirming the payment of the required fee, as well as a statement of the entrepreneur's desire to switch to the simplified tax system, if necessary.
It usually takes about three days to review the application and formalize the status of the individual entrepreneur, after which you can start working as an insurance broker or insurance agency.

Conclusion

As you can see, a business in the field of auto insurance can be diverse and involve working with different insurance products. When starting your own business in this area, it is important to have some experience in auto insurance, which will allow you to plan the work of the new company as effectively as possible.

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