Launching Your Insurance Adjusting Office: A Comprehensive Guide

Opening an insurance adjusting office is a complex process that requires careful planning and a strong understanding of the industry. While it can be a rewarding venture, there are several steps that aspiring business owners must take to ensure success. From developing a comprehensive business plan to obtaining the necessary licenses and permits, the journey towards establishing an insurance adjusting office demands a diligent approach and a clear strategy. In addition, gaining practical knowledge about the role of an insurance adjuster is crucial. This involves understanding the different types of adjusters, such as staff, independent, and public adjusters, and the specific skills they employ to handle claims effectively.

Write a business plan

A business plan is essential for the success of your insurance adjusting office. It will help you secure funding, plan out your growth, and improve your chances of success. Here are the key components of a strong business plan:

Executive Summary

Provide a concise overview of your business plan, including your agency's mission statement, the type of insurance agency you operate (e.g. direct writer/captive or independent insurance agent), your current status (startup, growth stage, etc.), and a summary of each subsequent section of your plan. This section should engage the reader and highlight the key aspects of your business.

Company Overview/Company Analysis

Go into detail about the type of insurance agency you are operating, including whether you sell policies from a single insurance company or multiple companies. Provide background information on your business, such as when and why you started, milestones achieved, and your legal structure (e.g. S-Corp, LLC, sole proprietorship).

Industry Analysis/Market Analysis

Offer an overview of the insurance industry and market in which you will operate. Discuss trends, such as technological advancements, changing customer preferences, and the impact of COVID-19. Identify your target market and explain how your agency fits into the competitive landscape.

Customer Analysis

Describe your target customers in detail, including demographic information such as age, gender, location, and income level. Explain their needs and buying habits, and how your insurance products meet those needs. Consider psychographic profiles to understand their wants and tailor your offerings accordingly.

Competitive Analysis

Identify your direct and indirect competitors. Direct competitors are other insurance agencies, while indirect competitors include self-pay, public insurance, and direct interactions with insurance carriers. Analyze their strengths and weaknesses, and outline your areas of competitive advantage, such as superior products, faster acquisition, better customer service, or more competitive pricing.

Marketing Plan

Detail your marketing strategy, including the four Ps: Product, Price, Place, and Promotion. Reiterate the type of insurance agency and specific products/services offered. Document your pricing strategy and how it compares to competitors. Discuss the location of your office and how it will impact your success, such as proximity to potential customers or complementary businesses. Outline your promotional methods, such as appealing store design, local advertising, partnerships, and digital marketing.

Operations Plan

Provide an overview of your agency's operations, including office location, hours of operation, and staff. Describe your day-to-day processes, such as customer service, relationships with insurance carriers, and claims handling. Outline your short-term and long-term goals, including milestones for customer acquisition, revenue targets, and expansion plans.

Management Team

Introduce your management team and highlight their relevant experience and qualifications. Emphasize any direct experience in the insurance industry and explain how their skills will contribute to your agency's success. If your team is small, consider assembling an advisory board of mentors with insurance or small business expertise.

Financial Plan

Present your financial statements, including your income statement (profit and loss statement), balance sheet, and cash flow statement. Include financial projections for the next five years, broken down by month or quarter for the first year. Discuss your funding requirements, sources of funding (e.g. personal savings, bank loans, angel investors), and how you intend to use the funds. If seeking investors, specify the amount of funding needed, future funding needs, and your strategy for utilizing the funding.

Choose your legal structure

When starting an insurance company, choosing the legal structure is an important step. The legal structure determines the amount of personal liability you take on. Here are some common structures you can consider:

• Sole Proprietorship: This is the simplest structure, but it carries the highest personal liability. As a sole proprietor, you may have to use your personal assets to settle business debts, and your personal assets are at risk if your business is sued.
• Partnership: In a partnership, you share ownership of the business with one or more individuals. Similar to a sole proprietorship, partners can be personally liable for business debts and lawsuits. However, it is important to establish a partnership agreement that outlines how profits, losses, and management responsibilities will be shared.
• Limited Liability Company (LLC): An LLC provides a legal distinction between you and your business entity, offering protection for your personal assets. It is more complex and costly to set up, but it can shield your personal assets in most circumstances.
• Corporation: Forming a corporation is the most complex and expensive structure, but it offers the strongest level of personal liability protection. Corporations are separate legal entities, so owners are generally not personally liable for business debts and legal issues.

Each legal structure has its own risks and benefits, and it is important to consider your specific circumstances and seek legal advice when choosing the appropriate structure for your insurance adjusting office. Additionally, regardless of the structure you choose, obtaining the right business insurance can further protect your company and limit risks.

Get licensed

To open an insurance adjusting office, you'll need to get licensed. Here's a detailed guide on how to obtain your insurance adjusting license:

Step 1: Meet the Basic Requirements

To become a licensed insurance adjuster, you must meet certain basic requirements. These typically include:

• Minimum age: 18 years or older.
• Residency: You must be a bona fide resident of the state in which you plan to obtain your license.
• Education: A high school diploma or GED is usually the minimum educational requirement. However, some states may require pre-licensing education or a certain number of credit hours related to claims adjusting, insurance information, state laws, and ethics.
• Valid driver's license: This is often necessary as adjusters may need to travel to inspect damage sites.

Step 2: Choose Your Adjuster Type

There are different types of insurance adjusters, including staff adjusters, independent adjusters, catastrophe adjusters, and public adjusters. Each type has its own unique characteristics and requirements. Decide which type of adjuster you want to be as it will determine the specific steps and licenses you need.

Step 3: Complete Pre-Licensing Courses

Many states require you to take pre-licensing courses or exams before you can become a licensed insurance adjuster. These courses provide valuable knowledge about the role of an adjuster and the insurance industry. The requirements for these courses vary by state, so be sure to check with your state's insurance department for specific details.

Step 4: Obtain State Licensing

If your state requires licensing for insurance adjusters, you will need to pass the state licensing exam. This exam tests your knowledge of insurance laws, regulations, and practices. Some states may also require you to submit fingerprints and pass a background check. Obtaining your home state license first is generally recommended, as it may have reciprocity with other states, making it easier to obtain non-resident adjuster licenses.

Step 5: Apply for Reciprocal Licenses

If you plan to work in multiple states, you will need to apply for reciprocal licenses in those states. This process typically involves submitting an application and paying the required fees. Having reciprocal licenses allows you to work across state lines and increases your employment opportunities.

Step 6: Maintain Your Licensure

Once you have obtained your insurance adjusting license, it is important to maintain it through continuing education and regular license renewal. Most states require adjusters to earn continuing education credits by taking courses or participating in training sessions. Staying up to date with your licensure ensures you remain compliant with state regulations and can continue practicing as an insurance adjuster.

Learn the software

Learning the software is a crucial step in opening an insurance adjusting office. Claims estimating software has revolutionised the insurance industry, providing a streamlined and efficient approach to processing claims. As an insurance adjuster, you will need to become proficient in using industry-specific software to evaluate insurance claims and determine the liability of insurance companies.

There are several types of software used by insurance adjusters, each serving a specific purpose:

Claims Estimating Software

Claims estimating software helps insurance adjusters produce detailed estimates for repairs and replacements. This software allows users to document, assess, and quantify various aspects of a claim, including damage, materials, area, and cost. It uses advanced algorithms and industry databases to simplify the estimation process, resulting in improved efficiency and customer satisfaction. Examples of such software include Xactimate and Symbility, with Xactimate being the industry standard. AdjusterPro offers a highly-rated Tactical Xactimate training course specifically for insurance adjusters.

Mobile Claims Adjustment Software

Mobile claims adjustment software assists mobile claims adjusters in verifying the circumstances of an incident and preparing detailed reports. It streamlines the process of assigning claims to the right adjuster based on defined rules, improving the efficiency and quality of customer service. An example of such software is Comarch FSM, which includes features such as automated claim assignments, improved reporting, and a mobile app for claims adjusters.

Auto Damage Estimating Software

For auto adjusters and appraisers, auto damage estimating software is essential for completing inspections and assessments. While there are several options available, CCC One is recommended as it is the most widely used and accepted in the industry. Other options include Mitchell and Audatex.

Accounting and Bookkeeping Software

For independent adjusters who run their own business, accounting and bookkeeping software is crucial for invoicing, tracking expenses, and managing finances. Examples of such software include Freshbooks and Quickbooks.

Claim Management App

A claim management app, such as Livegenic, can be a valuable tool for video inspections and managing claims remotely.

Mapping and Route Planning App

A mapping and route planning app, such as BadgerMapping, can help insurance adjusters optimise their travel routes and efficiently manage appointments.

Other Tools

In addition to software, insurance adjusters may also utilise various tools and equipment to assist in their work. This includes items such as cell phones, laptops, digital cameras, measuring tools, and tool belts.

Hire staff

When hiring staff for your insurance adjusting office, there are several key steps to follow.

Firstly, assess your staffing needs. Determine the specific duties and skill requirements for the position(s) you are hiring for. Consider what job duties you need help with, whether you need full-time or part-time support, and the type of experience and education a new staff member will need to succeed.

Next, write a detailed job description. This should include a clear and concise job summary, a list of duties and responsibilities, decision-making authority, and the requisite knowledge, skills, experience, and education needed.

Then, determine the pay and benefits you will offer. Consider what is equitable compared to similar positions in your community and within your company. Think about the complexity of the work, the necessary skills and experience, and the time commitment required. You may also want to offer unique benefit packages, such as flex-time, telecommuting, or medical and dental insurance, to attract high-quality staff.

Once you have determined the job details and compensation, it's time to publicize the job opening. Utilize your network, post help wanted ads in local newspapers or online job sites, and visit job placement offices at local colleges or trade schools. You can also use employment services or temporary staffing agencies, which can be beneficial if you need to fill multiple positions or want the flexibility to evaluate candidates on a temporary basis.

Finally, select the best candidate for the job. Use screening tools such as applications, resumes, references, background checks, and interviews to predict job performance and ensure a good fit. Performance-simulation tests and psychological tests can also be used, but be sure to comply with equal rights legislation and consult a psychologist if you choose to include these assessments.

Remember to consult local laws and regulations when designing your hiring process and writing office policies and procedures.

Frequently asked questions