How to start an Auto Insurance Company?
Saturday, January 23rd, 2010 at
10:57 am
Randall L asked:
Some friends and I are talking about what we need to do to start our own Auto Insurance Company, in Georgia. We can have the money to back claims up to the state limits. What would we have to do to put this plan into action? Is it like starting any business just get a business license. We have gone over all the figures as long as this is something that would not be costly; we could save money and turn a profit. And maybe some day branch the company out side of friends and write policies to others.
Some friends and I are talking about what we need to do to start our own Auto Insurance Company, in Georgia. We can have the money to back claims up to the state limits. What would we have to do to put this plan into action? Is it like starting any business just get a business license. We have gone over all the figures as long as this is something that would not be costly; we could save money and turn a profit. And maybe some day branch the company out side of friends and write policies to others.
Tagged with: Auto Insurance Company • Business License • Friends
Filed under: Auto Insurance
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I would definitely hire a lawyer. You would want a lawyer to complete all of your legal papers your customers would have to sign. I would also, if you’re serious of doing this hire a consult. You wouldn’t want to start on the wrong foot.
If you have the money to pay up to the state minimums – some states will let you file a bond in lieu of obtaining insurance. The State Financial Responsibility Law usually does not require insurance, just that you be able to meet certain financial requirements. You will need to research your states Financial Responsibility Law.
Keep in mind- that if you are able to file a bond – you will not have collision/comprehensive, uninsured motorist, under-insured motorist, medical payments, towing/labor or rental car coverage.
You will literally have the bare minimum and should you cause an accident – you can be held personally responsible for any damage/injuries you cause over the 25K state minimums.
You need Billions to back it up. It’s not just, oh, I have $40,000 to cover an accident. See, people can ::gasp:: have more than one accident, in a year.
You need approval from your state insurance department, which means submitting audited financials. It means submitting sample policy forms, projected losses, along with the business plan, and investment plan for the reserves (those billions).
It’s NOT like any business, it’s more like banking – heavily, heavily regulated.
Congratulations on being able to save up enough money to meet the minimum liability requirements in your area. While this is sufficient for you to obtain a bond that will allow you to be exempt from having to purchase automobile insurance, however this is no where near the amount of money you would need to start an actual insurance company. First off what if a client wants to purchase more than the minimum required by law? What if they want higher liability limits and/or collision and/or comprehensive coverage? Also an insurer is required to pay all valid claims throughout the policy term. so if the insured had 10 accidents and each claim paid out the policy limit then the insurer would be paying out several hundred thousand dollars just for the one policy. This is why any regulatory body would require an insurer to carry tens of millions of dollars in reserves in order to pay out claims in a worst case scenario. Plus the costs associated with running an insurance company are huge, let alone the start up costs. The business license is a small drop in the bucket. You would need full time accountants to produce audited financial statements (probably quarterly). You would also need a law FIRM at your beck and call the first year (at least) in order to deal with all the filing in order to become an insurance company, never mind having them go over your policy wordings to ensure that there are no loopholes or unintended consequences. You would also need to hire actuaries to determine what rates you will be charging. Regulators will want this data to ensure that you are charging enough that you will be able to meet your financial obligations (the regulators won’t accept you saying, “Well we’ll charge this much as see how it goes.” .
Randall L, For car insurance the quickest way to get a low quote is do a policy comparison. Be sure to choose the same coverage levels, you can get an fast quote to compare against others. Use the same zipcode, auto make and model, mileage and driving history to ensure you get an apples to apples comparison. To get easy auto quotes, go to and you can compare the major auto insurance companies.