Launching An Insurance Carrier In Florida

Starting an insurance company in Florida is no small feat, but with the right knowledge and a lot of hard work, it can be done. Here is a brief introduction to the process.

First, you need to become a licensed insurance agent. This involves learning about Florida's licensing process, deciding on the type of insurance you want to sell, taking a pre-licensing class, scheduling and passing your licensing exam, and applying for your license.

Next, you will need to write a business plan. This plan will outline your business goals and strategies, including your target market, competitors, and financial needs and resources.

Then, you must choose a business structure, such as a sole proprietorship or limited liability company (LLC), which will impact your personal liability and taxation.

After that, you can register and license your business with the state of Florida, obtain a tax ID number, and get the necessary business licenses and permits.

It is also important to get business insurance to protect your investment and comply with regulations.

Finally, you can start forming relationships with insurance companies and growing your client base through networking, marketing, and building an online presence.

Get a licence to become an insurance agent

To get a licence to become an insurance agent in Florida, you must meet certain requirements and follow a specific process. Here is a detailed guide on how to obtain your insurance agent licence:

Step 1: Meet the Basic Requirements

To be eligible for a Florida insurance agent licence, you must meet certain residency and age criteria and possess a Social Security Number. These are the fundamental criteria you need to meet before initiating the licensing process.

Step 2: Complete the Pre-Licensing Course

The next step is to enrol in and complete a pre-licensing course. The required number of study hours depends on the type of insurance licence you are pursuing. For example, the General Lines (Property & Casualty) licence, which is the highest level of authority in Florida, mandates 200 hours of study. In contrast, other licences may require as few as 40 hours of pre-licensing education. Regardless of the licence type, the curriculum must include a minimum of three hours of ethics instruction.

You can opt for either a basic or an essential course, with tuition fees ranging from $139 to $189. These courses are typically offered in collaboration with educational institutions like Kaplan University. The pre-licensing course will equip you with the foundational knowledge you need to pass the licensing exam.

Step 3: Pass the State Licensing Exam

After completing your pre-licensing course, you must pass Florida's licensing exam for the specific type of insurance licence you are seeking. The exam can be scheduled at any time, even before finishing the course, and it is recommended to take the exam within 5-10 days of completing your course. The exam can be taken in person or remotely, and it consists of 40 to 160 scored questions, depending on the licence type. To pass, you need a score of 70% or higher.

Step 4: Register for Fingerprinting and Background Check

To obtain your insurance licence, Florida requires electronic fingerprinting for a criminal background check. You must register and pay for this service through authorised channels, such as MorphoTrust. The cost of fingerprinting is $48.55, and the results will be submitted directly to the Florida Department of Financial Services.

Step 5: Submit Your Licence Application

Once you have completed the pre-licensing course, passed the exam, and undergone fingerprinting, you can submit your licence application to the Florida Department of Financial Services (DFS). The application requires you to share personal information and includes a fee of $55 payable to the DFS. You can create an account on the DFS MyProfile page to manage your application.

Step 6: Receive and Print Your Licence

After successfully completing all the above steps, you will receive an email notification from the DFS Bureau of Licensing regarding your licence approval. You can then print your licence directly from your MyProfile account.

The entire process, from pre-licensing education to obtaining your licence, comes at a cost. For instance, the 2-15 Health & Life Insurance Licence will cost you $147.55, plus the course tuition.

Write a business plan

Writing a business plan is a crucial step in starting an insurance company. It is a roadmap that guides your business towards success and helps secure financing and startup capital. Here is a detailed outline of what a comprehensive business plan for an insurance carrier in Florida should include:

Executive Summary

Although this section is usually written last, it serves as an introduction to your business plan. It should quickly engage the reader by providing an overview of your insurance agency business, including whether it is a startup, an existing agency you want to grow, or if you are operating multiple locations. Briefly describe the insurance industry, the type of insurance agency you are running, your target customers, marketing plan, key team members, and financial plan.

Company Analysis

Detail the type of insurance agency you are operating. For example, are you a Direct Writer/Captive agency that sells one insurance company's products, or an Independent Insurance Agent that sells policies from various companies? Explain the background of your business, including when and why you started, and any milestones achieved, such as sales goals or new location openings. Also, specify your legal structure, such as whether you are incorporated as an S-Corp, LLC, or sole proprietorship.

Industry Analysis

Provide an overview of the insurance industry, including its size, growth trends, key competitors, insurance carriers, and relevant market size. This section educates you about the market and proves your expertise to potential investors.

Customer Analysis

Describe the customers you serve or expect to serve, including individuals, households, or businesses. Break down your target customers into demographic profiles, including age, gender, location, and income level. Also, understand their psychographic profiles, which explain their wants and needs, to better attract and retain customers.

Competitive Analysis

Identify your direct competitors (other insurance agencies) and indirect competitors (other options customers have, like self-pay or public insurance). For direct competitors, provide an overview of their businesses, products, pricing, strengths, and weaknesses. Then, outline your areas of competitive advantage, such as superior products, faster services, better pricing, or improved customer service.

Marketing Plan

The marketing plan should cover the four P's: Product, Price, Place, and Promotion. Detail the specific products/services you will offer, such as P&C insurance or life insurance. Document your pricing strategy and how it compares to competitors. Discuss your agency's location and how it will impact your success, such as being situated next to a Department of Motor Vehicles office. Finally, outline promotional methods, such as advertising in local media, partnering with local organizations, or using attractive storefront displays.

Operations Plan

Describe the everyday short-term processes involved in running your insurance agency, such as serving customers, negotiating with repair shops, and procuring relationships with insurance carriers. Also, outline your long-term goals, including customer acquisition milestones, sales targets, plans for expanding to new locations, or timelines for hiring additional staff.

Management Team

Highlight the key members of your team, emphasizing their skills and experiences relevant to growing a successful insurance agency business. If your team is lacking in certain areas, consider assembling an advisory board of mentors with expertise in insurance agencies or small business operations.

Financial Plan

Create a 5-year financial statement, broken down into monthly or quarterly projections for the first year and then annually. This should include an income statement (Profit and Loss), balance sheet, and cash flow statement. Make sure to include key costs related to starting or growing your insurance agency, such as location build-out, design fees, construction, and payroll. Attach your financial projections and supporting documents like store design blueprints or location leases in the appendix.

Choose a business structure

Choosing a business structure is a critical decision that will impact your insurance company in Florida in several ways. It will determine the level of liability protection you need, how you pay your taxes, your financing options, and the administrative complexity of your business. Here are some common business structures to consider:

C-Corporation (C-Corp)

The C-Corporation structure is a separate legal entity with a charter granted by the state. C-Corps can sell shares of stock to raise money, and shareholders become owners based on their investments. This structure offers the best protection against liabilities. There are no limits to the number of investors or the size of investments, making it attractive to equity investors. C-Corps can also offer employees tax-deductible benefits, such as medical insurance and retirement plans. However, setting up a C-Corp requires significant time and resources, and you will be subject to double taxation on corporate profits and dividends paid to shareholders.

S-Corporation (S-Corp)

S-Corps are structured similarly to C-Corps but are exempt from double taxation on earnings. Earnings flow through to the individual tax returns of shareholders, and they are protected from personal liability. S-Corps are subject to restrictions, such as a limit of 100 shareholders, and shareholders cannot be foreigners or other corporations. This structure is suitable for many small businesses but may not be ideal if you're pursuing numerous shareholders or venture capital financing.

Limited Liability Company (LLC)

An LLC is a hybrid business entity that shields owners' personal assets from business liability while allowing income to be taxed as personal income. LLCs can have an unlimited number of members and are required to file tax returns. They are considered pass-through entities and receive a 20% tax deduction. However, LLCs have higher costs and complexity, a limited lifetime of 30-40 years, and may not be ideal for companies generating a lot of cash.

Sole Proprietorship

Sole proprietorships are suitable for individuals or married couples who want a simple setup. They are easy to register and license with state and local governments. Sole proprietorships have a pass-through tax structure, allowing for a 20% tax deduction. However, a significant drawback is that personal assets have no legal protection, leaving owners personally liable for any mistakes or issues with products or services.

General Partnership

General partnerships are similar to sole proprietorships but involve two or more owners (who aren't a married couple). Taxes flow through to each partner's individual return, and they also benefit from a 20% tax deduction. However, general partnerships offer no liability or professional indemnity protection, putting owners' personal assets at risk. Banks also tend to be reluctant to provide capital to general partnerships.

Limited Partnerships

Limited partnerships are complex structures with two classes of partners: limited partners (LPs) and general partners (GPs). LPs raise capital and have ownership without responsibility for running the company, while GPs have more control but face greater liability. Limited partnerships are often chosen by lawyers and for projects with a limited time frame. However, they carry a high risk of lawsuits and debt, and the costs of setting up a limited partnership can be substantial.

Remember, it's important to consult with legal and financial professionals to determine the best business structure for your insurance company in Florida, as different types of insurance companies may have varying regulatory requirements.

Register and license your business

Registering and licensing your business is a crucial step in starting an insurance carrier in Florida. Here are the key steps to follow:

Choose a Business Structure

The first step is to choose the legal structure of your business. Common structures include a sole proprietorship, partnership, limited liability company (LLC), or corporation. Each structure has its own risks and benefits, with sole proprietorships being the simplest but carrying the most personal liability. LLCs and corporations offer more protection for your personal assets but are more complex and costly to set up.

Register Your Business Name

Once you've chosen your business structure, it's time to register your business name. In Florida, you need to ensure your agency's name is not misleading or deceptive and does not imply that it is an insurance company or a governmental agency. You can register your chosen name with the state government, usually for a minimal fee.

Obtain a Tax ID Number

You will need to obtain a federal employer identification number (FEIN) from the IRS if you are a corporation or partnership. This number is necessary for filing taxes and opening a business bank account. If you are a sole proprietor or a single-member LLC, you may use your Social Security number instead.

Register with the State

After obtaining your tax ID, you must register your business with the state. In Florida, this typically involves registering as a "resident business entity" for state and local tax purposes through the state insurance commissioner's office. There will likely be a registration fee, and you will need to comply with all state requirements.

Obtain Necessary Licenses and Permits

To operate legally, you will need to obtain the necessary business licenses and permits. Check with the state and local agencies to ensure compliance with regulations. In Florida, you will need to obtain an agency license by applying through MyProfile and providing the required information, such as your Federal Employer Identification Number. Additionally, each location of your insurance agency must designate a licensed and appointed agent in charge.

Display Your Agency License

According to Florida law, all insurance agencies in the state must prominently display their Department-issued agency license. This certificate should be clearly visible to any customer or potential customer who enters the agency. Failure to comply with this statute may result in disciplinary action.

Get business insurance

Getting the right business insurance is a crucial step in starting an insurance carrier in Florida. It is important to protect your company from financial losses due to various risks. Here are the types of insurance you should consider:

General Liability Insurance

General liability insurance, also known as business liability coverage or commercial general liability insurance, is essential for most Florida businesses. It covers common risks such as customer property damage, injuries, and advertising injuries like libel. It can help pay expenses if your business is held responsible for injury or property damage to someone other than an employee. Most commercial leases in Florida require this coverage.

Workers' Compensation Insurance

Workers' compensation insurance is mandatory in Florida for businesses with four or more employees, including part-time workers. For the construction industry, businesses must have this insurance if they have even one employee. This insurance covers medical expenses and lost wages for employees who suffer work-related injuries or illnesses.

Commercial Auto Insurance

If your business owns vehicles in Florida, you are required to have commercial auto insurance. It covers injuries, property damage, vehicle theft, vandalism, and weather damage related to business-owned vehicles.

Commercial Property Insurance

Commercial property insurance covers the repair or replacement of business property, including equipment and inventory, in the event of fire, water, or wind damage.

Professional Liability Insurance (Errors and Omissions Insurance)

Professional liability insurance, also known as errors and omissions insurance (E&O), is important for small business owners who provide professional services. It covers legal costs related to work performance, including accusations of negligence, errors, and oversights.

Cyber Liability Insurance

Cyber liability insurance, also known as data breach insurance, is crucial for businesses that store sensitive customer data. It covers expenses related to data breaches, including customer notification, credit monitoring, legal fees, and fines.

Commercial Umbrella Insurance

Commercial umbrella insurance provides additional coverage when the underlying policy reaches its limit. It helps protect your assets in the event of costly claims that exceed your primary policy limits.

When choosing insurance for your Florida business, it is important to compare quotes from different providers and consider bundling policies to save costs.

Frequently asked questions