Selling Auto Insurance In California: Strategies For Success

To sell auto insurance in California, you must obtain a license. The requirements for this license are maintained by the state's Department of Insurance and include pre-licensing education, an exam, and becoming appointed with an insurance company. In California, you need to complete 20 hours of pre-licensing education and pass the licensing exam. Once you have obtained your license, you can join an agency or brokerage and officially sell insurance.

Get licensed: complete pre-licensing education and pass an exam

To sell auto insurance in California, you must obtain a property and casualty insurance license. As licensing requirements vary from state to state, you should check with the California Department of Insurance or the insurance commissioner to determine the exact number of pre-licensing education hours needed, exam specifics, and registration fees.

In California, you need to complete 40 hours of pre-licensing class time and an additional 12 hours of ethics training. Pre-licensing coursework can be done in a classroom or online through a pre-approved vendor, and you must attend all hours to be eligible for licensing. The class registrar will report your hours to the Department of Insurance upon successful completion of the classes.

After completing your pre-licensing education, you must pass the California licensing exam. This exam is proctored and given at test centers. To pass, you need a score of 60%. To prepare, you can take practice exams provided by your pre-licensing provider. When scheduling your exam, be aware that you will need to wear comfortable clothing without excessive pockets, and you will need to leave all personal items outside the testing room.

Once you have passed the exam, you can become "appointed" with an insurance company, which means you are allowed to sell their products. You will need to decide what type of agent you want to be: a captive agent, who sells only one company's products, or a broker, who sells insurance from multiple companies.

Choose your agent type: captive or broker

When selling auto insurance in California, you will need to decide whether to work as a captive agent or an insurance broker. Here are some key things to consider when making that decision:

Captive Agent

Captive agents work for only one insurance company and are paid by that company, usually with a combination of salary, commission, and benefits. They may be full-time employees or independent contractors. Captive agents have an in-depth knowledge of their company's insurance products and benefit from strong brand support, including a national advertising budget. The company will also provide them with a client list.

The downside of being a captive agent is that you are limited to selling the products of the company you work for, which may not always be in the best interest of the client. You may also be pushed to sell certain policies or meet sales quotas. Additionally, you are tied to the company with cumbersome contracts, which can restrict how you conduct business.

Insurance Broker

Insurance brokers act as intermediaries between the client and multiple insurance companies. They help clients find a policy that best fits their needs and charge a broker fee for their services. While this fee is an additional cost, a good broker can save the client time and money by finding them a suitable policy at a reasonable price.

Brokers are especially useful for clients with more complicated insurance needs, such as landlords or small business owners who need several policies. They can also be beneficial for clients who want to understand the ins and outs of their policy or want a personal relationship with their insurance agent.

Brokers receive a commission from the insurer when placing a client with that company, and they may also charge a broker fee. It is important to ask about any fees upfront, as these can vary.

Both captive agents and insurance brokers have their advantages and disadvantages. Captive agents benefit from the support of the insurance company and have extensive knowledge of its products, but they are limited in the policies they can offer. Insurance brokers have more flexibility in finding the best policy for the client but may charge additional fees for their services. Ultimately, the decision depends on your personal preferences and how you want to position yourself in the insurance industry.

Pick a license type: resident, non-resident, or business entity

Picking the right type of license is crucial when selling auto insurance in California. There are three main types of licenses to choose from: resident, non-resident, and business entity. Each has its own set of requirements, restrictions, and benefits. Here's a detailed overview of each license type:

Resident License:

A resident insurance agency license is required if your business is based in California and you plan to operate within the state. This license allows you to sell insurance policies and conduct business within the state borders. The process of obtaining a resident license typically involves registering with the state, completing pre-licensing education, passing a state licensing exam, and fulfilling other requirements set by the California Department of Insurance (CDI).

Non-Resident License:

The non-resident insurance agency license is intended for insurance agencies and agents located outside of California. This license enables them to operate and sell insurance policies in the state without having to take California's state licensure exams. California has reciprocity agreements with other states, making it easier for out-of-state insurance professionals to obtain a non-resident license.

Business Entity License:

A business entity license is necessary for businesses involved in selling insurance policies in California. This license allows your business to legally operate and offer insurance services to customers. The specific type of business entity license you need depends on the structure of your business, such as whether it's a corporation, partnership, or limited liability company (LLC). Obtaining a business entity license typically involves submitting an application, meeting financial security requirements, and complying with naming guidelines set by the CDI.

It's important to carefully consider your business structure, location, and target market when choosing between these license types. Each license has specific requirements and restrictions, so be sure to review the guidelines provided by the California Department of Insurance to ensure you meet the necessary qualifications for the license you intend to pursue.

Submit an application, fingerprints, and relevant documents

To sell auto insurance in California, you must submit an application, fingerprints, and relevant documents. Here is a detailed guide on this process:

Fingerprint Requirements:

Get your fingerprint impressions taken by a law enforcement agency (police department, sheriff's office, etc.) or an authorized vendor who can complete paper fingerprinting on a standard FBI fingerprint card. You can obtain the fingerprint card from the law enforcement agency, or by sending an email request to the Producer Licensing Bureau. Ensure that your fingerprint impressions are properly recorded and that the appropriate sections of the Live Scan Service Request (form BCIA 8016) are completed. On the fingerprint card, enter "A0042" as the "ORI" number and "1000" as the "OCA" number.

Submission Process:

Include the $75 processing fee for the fingerprint impressions, payable by check or credit card. Mail the completed fingerprint card, Live Scan Service Request, and payment to Accurate Biometrics at the following address: Accurate Biometrics, 6080 Center Drive, Suite 600, Los Angeles, CA 90045. Your application will not be processed until your fingerprint impressions are received and cleared by the California Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI). This process may take up to 45 days, so plan accordingly.

Application and Relevant Documents:

In addition to submitting your fingerprints, you must also complete and submit your non-resident individual application for an insurance license. This can be done online through Sircon's Apply for a License portal. The application fee varies depending on the license type, so be sure to review the list of license fees. Additionally, if you are applying for a renewal, the renewal fee may differ based on the license type. You can find more information on the California Department of Insurance website or by contacting their Licensing Hotline.

Comply with the bonding requirement

To sell auto insurance in California, you must comply with the bonding requirement. This means that you need to obtain a surety bond, which is a type of insurance that protects the public if an auto dealer breaks the laws pertaining to motor vehicles. The bonding requirement varies depending on the type of dealer license you have. For example, wholesale dealers or retail dealers who exclusively sell motorcycles and/or ATVs are required to obtain a $10,000 bond, while all other retail car dealers must obtain a $50,000 bond.

The Motor Vehicle Dealer Bond is typically required as part of the business licensing process and can be purchased through a surety company or a broker. This bond ensures that the motor vehicle dealer engages in ethical business practices and is meant to protect all purchasers, sellers, financing agencies, and government agencies from monetary loss stemming from any fraud, failure to comply with licensing laws, or failure to pay required taxes and fees.

In addition to the Motor Vehicle Dealer Bond, there are other types of surety bonds that may be required for businesses in California, including Contractor License Bonds, Insurance Adjuster Bonds, and Cannabis/Marijuana License Bonds. These bonds are mandated by different government agencies and are necessary for compliance with various rules and regulations.

The cost of surety bonds in California typically ranges from 0.5% to 3.0% of the bond amount or required coverage, and they can be purchased online or through a broker. It is important to note that the bonding requirement is just one aspect of selling auto insurance in California, and there may be additional licenses, registrations, or certifications needed to comply with all the requirements.

Frequently asked questions