How do you go about staring an insurance company in Illinois.?

Question

So how would you do this and about how much would it cost? People were saying that it costs millions and millions of dollars. But if it costs that much then how would anybody ever be able to start one? Is it a good idea to start an insurance company or do you think that it probably would not be a success? Also, what is the difference between an insurance comany and an agency. do make a lot of money if you start an insurance agency?

Answer 1

Yes, it costs millions to start a new insurance company. First off you have to have a certain dollar amount in reserves to pay future claims. This dollar amount will depend upon the type of insurance you are selling and how many policies you expect to have but is up in the millions. The reserve will be a combination of actual cash and re-insurance (which is insurance you buy to cover you in the event you don't have enough reserves).

You also have to have people working for you. You'll have agents, customer service people, actuary people, and a bunch more. You have the payroll and operating expenses for all of these people.

Many insurance companies are started by other companies which are in a similar field or by groups of investors.

Whether it is a success or not depends upon too many factors to go into here.

An insurance agency is maybe one or a few agents that sell the insurance for the insurance companies. Although it is much easier to start an agency, only about 5% of the agents make it through the first year.