Hi everyone.
Say if I want to open up an insurance company, what kinds of cost should I be expecting? Costs include material ones such as the amount of capital required and the relevant operating costs, immaterial costs such as having to find out what kind of regulation to obey and to what extend is the potential risk I will be in for?
Just costs like the above examples. Plesae, help me to find out these costs.
I know the costs are going to be A LOT! But, I just want to know what KINDS of costs and approximate amounts of them.
Thanks.
Well, by the law of large number, not really if you have a large number of insurants. A regular insurance company does not hold the same amount of capital as their policy liability at all time either.
Anyway, I don't intend to open up an insurance company, I just need to know what the relevant costs are.
Well...
The obvious one that comes to mind is:
'Enough money to cover damage/theft to the property/items that you company will provide coverage for'.
probably more than you can afford.
if you provide $100 000 worth of cover you need $100 000 (plus operating costs)
I can't remember what the bonding requirements are in the state of CA. You can look it up on your state's department of insurance website. That will answer most of your questions.
Operating costs would be your typical:
employee salaries
overhead
insurance for E&O
investment banking fees
bean counters need to be paid too
marketing & advertising
The amount of capital required would be dependent on the type and size of insurance company you opened.
The one ? it will not answer is the potential risk. You can risk it all if you don't have enough reserve to cover a catstrophic loss, such as an earthquake, flood, or hurricane.
You can start by building an insurance agency, and you can do that with a processing fee of $100 and the cost of your licensing. Contact me if your interested.