Start Your Own Insurance Company

[killah]

I want to start a Insurance Company, and wondering what steps do i need to take and if it is feasible.
Every year my insurance goes and up and no real reasons why and i see an opportunity to start a low cost insurance business.


any ideas?

 

[Rainbow Chasers']

You can become a broker fairly simply - i say simply, you still be the financial services qualifications etc.

As for being the insurer/underwriter - you need to apply to the secretary of state and hand over a some of money, somewhere around a million pounds before you can operate.

There are lots of other hoops, like legal qualifications, FSA permissions and licences, data protection, finance etc etc. Quite costly to be honest!

 

[killah]

so that's the catch, so no room for the little man to take on the big boys.

 

[Rainbow Chasers']

Have a look at FSA website - they may have something on there. You will need to research the insurance companies acts as well. You will read all about it there.

The fee you pay the secretary of state is a token payment to prove you have the means or something like that - around 15 years ago it was about a million pounds or similar. Not sure what it is now!

 

[akirk]

I want to start a Insurance Company, and wondering what steps do i need to take and if it is feasible.
Every year my insurance goes and up and no real reasons why and i see an opportunity to start a low cost insurance business.
any ideas?

low cost for whom - just you, or all your clients?
if for your clients then you only need one against the odds event (snow / wind / etc.) to kill the company...

so that's the catch, so no room for the little man to take on the big boys.

That is the little man


trouble with insurance is that you have to play the odds - the reason it goes up is more to do with a climate of increasing claims / suing / fraud / etc.

Alasdair

 

[Alex C.]

It's not really a 'catch' as such.

The great heck disaster cost the drivers insurers £30m. That was effectively a single claim. £250k is a relatively small amount.

I'll add that insurers are not exactly making massive profits from car insurance - although after this years record breaking premium increases, I'm sure they will next year.

 

[Lewy_T]

I spoke to a really helpful lady at the FSA the other day as our business needs to become regulated - or at least be able to sell a particular insurance product.


Cost for regulation is £1500 and you must have somebody on (the) board with experience (or at the very least qualifications). You can try without but you may (will) lose your money. A good start maybe to find a friendly local broker to help you get there but give them the facts from the start so that when you do break away it's not a 'back stabbing' experience.

 

[killah]

what does a broker do and is it easier to start and make money from.

 

[sinclairsea]

what does a broker do and is it easier to start and make money from.

Acts like a Middleman, is independent from insurance companies and acts to find you the best deal.

I have never personally used one, as I have never had to. Good luck if you decide you want to do this line of work!

 

I want to start a Insurance Company, and wondering what steps do i need to take and if it is feasible.
Every year my insurance goes and up and no real reasons why and i see an opportunity to start a low cost insurance business.


any ideas?

One of the reasons your insurance goes up is the increasing number of spurious 'personal injury' and 'whiplash' claims. These people seem to see theft as a victimless crime, but this is the result.

To make any money in insurance you need lots of volume (ie lots of advertising / commission costs) and investment some very sophisticated analysis/actuarial systems.

Additionally, as previously mentioned, you will need to bond a large sum of money to illustrate that you can meet potential claims.

 

[NuBlue]

Surely starting an insurance company/brokerage is a bit drastic just to bring down your insurance premium.... can't you just get some more quotes?

 

[Astaroth]

what does a broker do and is it easier to start and make money from.

Slightly concerned about this question if your thinking of getting into the insurance market.

The broker sells insurance on behalf of insurance companies to their clients. There are a number of different models for brokers; eg the likes of the AA where all the insurers are writing to the same T&Cs, traditional brokers where each insurer has its own T&Cs so the broker has to explain the cover difference as well as the price difference. Plus you also get open market brokers where for none standard risks they phone/ email round the insurers to get quotes.

There are other options like MGAs where your not an actual insurance company but have delegated authority from an insurer to write up to a certain amount of business using your own pricing model on behalf of the insurer without having to get permission from the insurer.

To be able to set up an insurance company your going to have to have a lot of money and hire a good number of people.

To set up an MGA you need a lot less money but are still going to need a fair number of highly skilled people to convince the insurers that your team have the expertise to delegate authority to you.

A brokerage is by far the easiest to set up and can be done on a fairly small scale in terms of both people and money but unless you have some exceptionally good contacts your going to get very very average deals on products that 500 other brokers are also selling.

You also need to be aware that many brokers/ insurers are selling their products at a loss and it is only through ancilary income generation or investment income that is allowing them to break even (if they are at all).

 

[TheGuru2010]

Im not 100% on this but i think the minimum you need is about £3million to set up as a insurer & that will only allow you to Write £1 Million worth of business,

As another poster stated the insurers dont make a fortune on personal lines insurance - The profit is just no longer there.

For the insurance broker on personal lines unless you either have a big spend for marketing (& the rates to sell the policy) or you have a prescence on a online comparison site (& there is now a waiting list) then you just wont pull the business in.

& as for the likes of direct line & aviva stating they dont go on a comparison site is aload of naff !!! they trade under diffrent names

RBS own - Direct Line, Tesco, churchill etc

And aviva are available through a broker so there rates end up on the comparison site !!

Here are some quick sums from a brokers point of view

Avarage UK motor Premium (Lets say £500)

They earn about 10% commision on this so lets say £50.00

so to make £500 in a day you would need to write 10 policies - I know this doesnt sound like alot but trust me as a new startup your rates wont compete with the long standing brokers.

Bear in mind you have to pay for systems, Phones, Staff, Regulation Cost etc.

My best advise would be to look for a broker that you feel you can "turn around" there are a few out there but i think to acctually make some decent money you would need to encorparate commercial insurance - there just isnt enough money in it for just personal lines.

 

[TheGuru2010]

Slightly concerned about this question if your thinking of getting into the insurance market.

The broker sells insurance on behalf of insurance companies to their clients. There are a number of different models for brokers; eg the likes of the AA where all the insurers are writing to the same T&Cs, traditional brokers where each insurer has its own T&Cs so the broker has to explain the cover difference as well as the price difference. Plus you also get open market brokers where for none standard risks they phone/ email round the insurers to get quotes.
There are other options like MGAs where your not an actual insurance company but have delegated authority from an insurer to write up to a certain amount of business using your own pricing model on behalf of the insurer without having to get permission from the insurer.

To be able to set up an insurance company your going to have to have a lot of money and hire a good number of people.

To set up an MGA you need a lot less money but are still going to need a fair number of highly skilled people to convince the insurers that your team have the expertise to delegate authority to you.

A brokerage is by far the easiest to set up and can be done on a fairly small scale in terms of both people and money but unless you have some exceptionally good contacts your going to get very very average deals on products that 500 other brokers are also selling.

You also need to be aware that many brokers/ insurers are selling their products at a loss and it is only through ancilary income generation or investment income that is allowing them to break even (if they are at all).

Well Said !!!!!!!

 

[killah]

good advice peepz was just an idea not a real business idea.

 

[Lewy_T]

what does a broker do and is it easier to start and make money from.

Fully appreciate that you want to 'make money' but it's not all about the money, a true business leader or whatever you want to call it must want to provide a good service / price.

For me, talk of, 'is there lots of money in it' without real care for the customer will not make much in the long run anyway.

Hopefully I've not just joined the wrong forum??

 

[Probafix]

Insurance agencies are normally started by insurance professionals and people with experience in financial services who want to spread their wings and become entrepreneurs. While it's okay to get excited about starting your own insurance agency, try to stay rooted in reality. Operating an insurance business is challenging to say the very least. It takes a lot of hard work, resolve and determination to kick-start an insurance business and keep it running smoothly.

 

[Benn]

Killah, you want to start an insurance company, but you dont know what a broker is, or anything about FSA regulation???

I would give up on this idea straight away!!!

 

[killah]

Killah, you want to start an insurance company, but you dont know what a broker is, or anything about FSA regulation???

I would give up on this idea straight away!!!

As i said before clever clogs, it was just a question not a real idea.

 

[Benn]

"good idea peeps - was just an idea, not a real business idea"

lol - bit of a silly one to put on a forum isnt it :|

 

[oberta]

One of the reasons your insurance goes up is the increasing number of spurious 'personal injury' and 'whiplash' claims. These people seem to see theft as a victimless crime, but this is the result.

To make any money in insurance you need lots of volume (ie lots of advertising / commission costs) and investment some very sophisticated analysis/actuarial systems.

Additionally, as previously mentioned, you will need to bond a large sum of money to illustrate that you can meet potential claims.

So nothing to do with Insurance company investments not making the same returns as in previous years then?

It never ceases to amaze me that people make comments on forums as "fact" when really it is just what they have read in the Daily Mail.

FACT: Insurance Claims across the board have been going down year on year since 2004.

FACT: The Insurance lobby portrays spurious claimants as the reason why everyone's premiums go up, in a blanket effort to limit the amount of claims made.

FACT: When you pay your insurance premium, the company invests the majority of the money in shares, and allocates around 11% of each premium for the claims budget.

FACT: Premiums are going up at the moment because return on investments are reduced, as a result of the markets as a whole going down.

 

[TheGuru2010]

So nothing to do with Insurance company investments not making the same returns as in previous years then?

It never ceases to amaze me that people make comments on forums as "fact" when really it is just what they have read in the Daily Mail.

FACT: Insurance Claims across the board have been going down year on year since 2004.

FACT: The Insurance lobby portrays spurious claimants as the reason why everyone's premiums go up, in a blanket effort to limit the amount of claims made.

FACT: When you pay your insurance premium, the company invests the majority of the money in shares, and allocates around 11% of each premium for the claims budget.

FACT: Premiums are going up at the moment because return on investments are reduced, as a result of the markets as a whole going down.

And where have you obtained these FACT'S from please provide your source

 

[Benn]

I work in the Insurance Industry, and anyone who is anyone will know that a personal motor insurer has not made a profit in this market for over 10 years!

Personal Motor insurance premiums are going to continue to rise for the forseeable future for the following reasons -

1. Claims frequency and costs are on the rise, not decrease (mainly due to no win no fee solicitors, plus the fact there are more cars on the roads)
2. Insurance underwriting in this sector has by and large gone straight out the window, all insurers are at the mercy of the distribution giants (compare, confused etc) - hence premiums are heavily discounted just to gain market share - the insurers then sell add ons to recoup the money lost on the actual premium
3. Insurers have been using their reserve capitals to fund the losses suffered in the motor market - these reserves are fast running out
4. Investment returns are down
5. We are in what is known as a soft market, as there are alot of new insurers, MGA's etc around with big financial backing, and without long tail claims to worry about - this is keeping the prices down also

So whilst most people think the cost of car insurance is ludacris, it isnt, its actually far cheaper than it should be, and will continue to rise for the forseeable future, especially when the industry does eventually return to a "hard market"...

 

[Alex C.]

So nothing to do with Insurance company investments not making the same returns as in previous years then?

It never ceases to amaze me that people make comments on forums as "fact" when really it is just what they have read in the Daily Mail.

FACT: Insurance Claims across the board have been going down year on year since 2004.

FACT: The Insurance lobby portrays spurious claimants as the reason why everyone's premiums go up, in a blanket effort to limit the amount of claims made.

FACT: When you pay your insurance premium, the company invests the majority of the money in shares, and allocates around 11% of each premium for the claims budget.

FACT: Premiums are going up at the moment because return on investments are reduced, as a result of the markets as a whole going down.

I work for an insurance company - an underwriter, not a broker. On household insurance, our combined ratio is around 97% - or 3p profit for ever £1 of premium we underwrite. With motor, it is around 110% - or a 10p loss for ever £1 of premium we underwrite.

Investment income comes on top of this - but we are spending, on average, 110% of premium income on claims costs and operating expenses.

110% is reasonably good in the current market for motor insurance - direct ine are running at a 120% combined ratio. Anyone who thinks the insurance companies are raking in profits are, in the vast majority of cases, wrong.

Where on earth did your 11% claims costs figure come from?

 

I want to start a Insurance Company, and wondering what steps do i need to take and if it is feasible.
Every year my insurance goes and up and no real reasons why and i see an opportunity to start a low cost insurance business.


any ideas?

Thought you were setting up a printing.com type business the other day and now your starting your own insurance company :|

 

[lr89]

To make any money in insurance you need lots of volume (ie lots of advertising / commission costs) and investment some very sophisticated analysis/actuarial systems.

Very true, you will also need to research for different softwares until you find an http://www.idit-technologies.com/category/document_managementinsurance policy administration system that will be cost effective for you.

 

[lockyer]

So nothing to do with Insurance company investments not making the same returns as in previous years then?

It never ceases to amaze me that people make comments on forums as "fact" when really it is just what they have read in the Daily Mail.

FACT: Insurance Claims across the board have been going down year on year since 2004.

FACT: The Insurance lobby portrays spurious claimants as the reason why everyone's premiums go up, in a blanket effort to limit the amount of claims made.

FACT: When you pay your insurance premium, the company invests the majority of the money in shares, and allocates around 11% of each premium for the claims budget.

FACT: Premiums are going up at the moment because return on investments are reduced, as a result of the markets as a whole going down.

I'm sorry, but this post is absolute and total B*ll&cks!

fact - Aviva paid out £1.27 for every £1 of motor premium paid in. this is before operating costs.

fact http://www.commercialpropertyinsurance.co.uk- NIG pulled out of personal lines this year as they couldn't make it work

fact - Chartis/AIG have announced this week they are pulling out of private car schemes with immediate effect as they can't make it work

fact - one of the driving factors behind quinn going to administration were the UK motor and liability insurance markets.

sorry rant over

 

[jimmy_sfsg]

Lets take a step back and understand the basic concept of insurance. Insurance companies are suppose to pool a small fee from subscribers to protect their asset1 and compensate those who suffer a loss. So if the fee exceeds the value of the asset1, i might as well buy another asset2 incase something happens to asset1. Do i need an insurance now? When most of the subscribers have replaceable assets then do they need insurance?

1) FACT - I have not heard of a natural disaster/act of god in UK in last 50 years which should result in claims on all policies issued by motor insurer. So if they are going bankrupt then are inefficient idiots and should not even underwrite their monthly household budget.

2) FACT - I am yet to see a insured car driver who made a claim and his entire claim was satisfied. So these insurance companies dont ven fulfill 100% of any contract they underwrite.

3) FACT - All most all insurance companies have healthy bottomlines. How do they do that when claims paid are 27% more than premiums received??? Some magic trick!!!!!

I can go on and on about how generations of drivers are being taken for a ride on their insurance premiums and claims by insurance companies who should not be in the business in first place. So go on and try to start a insurance company and you might be just the person who can show these idiots how to underwrite.