How Much Does it Cost to Start an Insurance Company?

When you start an agency, you’ll want to be careful about how and where you spend your money. We want you to only use it in the ways that will help you grow your commission income.

Other than Firefly’s packaged operating costs (for E&O, a comparative rater, and a management system), what expenses will you incur when starting your own insurance agency? The answer to this question totally depends on you. But since you asked, the most common expenses are:

1. Marketing Costs

It’s a good idea to invest money in setting up a website for your agency so your customers can learn more about what you offer. Some agents also choose to spend money on sending direct mail to possible customers (although only about 1% of people respond).

You can market locally by sponsoring things like school plays and getting an advertisement in the program. Some of our agents have also increased their leads by investing in memberships to associations or networking organizations. If you’re looking for leads from a specific group, say, restaurant owners, you might want to join an association of restaurants. Networking might seem like a slow-grow option, but it is definitely worthwhile.

If you don’t want to organically market, you could pay someone to get leads for you. There are companies that make phone calls and transfer people who are ready to talk to you. Some agents really like this strategy. Again, you’ll just want to be sure to spend money on the marketing methods that work for you.

2. Office Space

Having an office is NOT a requirement of being a Firefly agent. However, if you want a professional office from day one, you’ll want to factor in that expense.

Again, it is not required. One of our founders had his first office in a spare bedroom!

3. Phone Service

We don’t require agents to have office space, but you still need to be professional. This means having Facebook, Linkedin, and an agency website.

You will also need to have internet and a professional phone line. You don’t want a missed call from a customer to go to a personal voicemail!

Let me repeat: you need a designated line with a professional voicemail.

4. Staff

You’ll want to consider the cost of hiring staff if you’re planning on hiring people to help you. Ideally, you would hire someone whose strengths offset your weaknesses. If you’re bad at cold calling, car changes, customer service, or billing—all of which are tasks that must get done for your agency to function—you could get a staff member to help in that area of your business.

Like office space, having staff is not a requirement. But if you’d like to have someone help with the work and you can afford it, by all means, consider hiring someone.

5. MVRs and CLUE Reports

MVRs and CLUE Reports are essentially quick background checks on a driver or household that carriers require agents to run before writing an account. You’ll learn about the report-running process in your initial training.

These reports cost money, but they will only be a financial cost for you if you choose not to follow Firefly’s process. If you follow our procedure, you’ll rarely have to pay to run a report.

6. Business Cards and General Office Supplies

You must have a good computer, printer, and scanner to be an agent.

Business cards can help your marketing efforts, and you may want to invest in some. You should also consider the cost of general office supplies, especially if you decide you want to work in a professional office from day one.

7. Licenses and Renewals

You will incur costs for your insurance licenses (and their renewals) in each state that you do business. Our contract – and good business practice – requires that you maintain all legally required licenses to be an agent with us.

8. Your Own General Liability Insurance

Purchasing general liability Insurance protects you against many kinds of claims that could arise in your business. For example, if someone slips and falls when visiting your office and wants to sue you or Firefly, a general liability policy will cover them and us.

9. Continuing Education

Depending on the state you live in, there will be differing costs for continuing education. CE usually involves a fee, and tests can be purchased. For example, in Ohio, an agent must take classes and a test every two years in order to keep his or her license. The cost for CE is not too large however, and it’s just a necessary part of maintaining your license.

The main takeaway we want you to keep in mind is this: If you don’t think it will help you make more money, don’t spend on it!

If you’re ready to take the leap and become an independent agent, download our ebook and get started today!