The insurance business is resilient and inflation-proof. That’s because the industry offers products that people always need and will buy. Must buy, in many cases. Take auto insurance, for example. It’s mandatory in 48 U.S. states. You want to drive legally, you carry insurance.
Similarly, you can’t get a home mortgage without homeowners insurance. Many property owners won’t let you rent a unit in their building without renters insurance. Want to leave an inheritance to your loved ones? You get a life insurance policy. And on and on.
If there’s a drawback to starting such a company, it’s the typical problems of independent startups. No one knows you, and perhaps you’re not sure how to run a business because you’ve never owned one before.
Add to those obstacles the fact that the insurance industry is highly regulated. Can you navigate that course by yourself? That’s where the concept of the franchise insurance company comes to the forefront.
It’s one of the hottest franchise industries for investment today, let’s learn about these 6 benefits in the insurance franchise you’re considering:
1. An Established Business Model With Lower Risk of Failure
Here’s a quick stat: While traditional startups have a failure rate of almost 50% within the first five years, the rate of failure for franchise operations over the same time period is about 4%.
The difference? First, you start with a successful franchisor. One that’s been in business for years, or decades, and has tracked success. They pass along what they know to their franchisees in the form of both comprehensive startup training and ongoing support. And then there’s the power of that (hopefully) strong brand.
2. Brand Recognition and Built-In Trust
As a franchisee, your customers have been introduced to you before they’ve even met you. That is, they recognize and respect your brand. Your company name and logo bring ‘em in the door. Maybe they or their parents, siblings, neighbors, co-workers, or best friends have purchased insurance products from that franchisor in the past and recommend the brand.
You don’t get that kind of head start if you carry the name and logo of an independent startup. If you start from scratch, that includes your efforts to get customers to respond. The John and Jane Doe Insurance Company doesn’t exactly make the phones ring off the hook — not like a name that’s already achieved strong customer loyalty.
Of course, strong brand familiarity can be a drawback too. It’s only an advantage if it comes with the matching brand profiles of respect and preference. In other words, becoming a franchisee can be an instant competitive advantage, but only if your brand is trusted. Insurance, after all, is a serious financial subject. If your company name actually keeps customers from doing business with you, you’ve adopted the wrong brand.
The lesson here is to do your research and carefully consider your options before you sign on to become an insurance industry franchisee.
3. Ongoing Training and Corporate Support
Insurance is a complicated subject. So is sales. And so, for that matter, is entrepreneurship. If you’re a first-time business owner — or this is your introduction to the insurance industry — in-depth training and ongoing support had better be key components of the relationship.
You’ve also got issues of education and state-specific licensure and certification to deal with in this very specialized business category. Do you know how to get all of that done? Do you know how to study for licensure exams? Can you place a call and get expert advice when you feel brain-drained? (And you will.)
Once you get licensed and launch your business, what then? What happens the first time you get an issue you don’t know how to deal with? You lose a prospect because you didn’t know how to seal the deal. Or someone asked questions you couldn’t begin to answer. What then? Can you pick up the phone or send an email in the middle of the night and know that you’ll get timely and on-target help?
Education, in-depth training, and ongoing support are critical to your long-term success — but especially in those early days.
You know that your franchisor has the answers because they have a track record. But how able and willing are they to share what they know and become true partners in your shared success? These are assurances you need before you sign on the dotted line for any insurance franchise. If you get it, you’re golden.
4. Scalable and Flexible Ownership Models
What’s the deal on operational expectations with your franchise organization? Does it match the way you want to conduct business both in the long-term and day-to-day?
Are you restricted to owning just one location, for instance? Or, just the opposite concern, are you expected to start up and run multiple sites? There’s no right or wrong answer to either of these issues of scalability — except in how it matches or is an obstacle to your long-term goals and ambitions. The point here is, make sure you have answers.
Along similar lines, will your new insurance business take 60 hours a week to keep afloat? What if it’s a post-retirement business? In other words, you might want to run your business 20 or 30 hours a week and know there won’t be many late nights or weekends.
Or maybe you’re willing to work six or seven long days a week right now, while you launch your franchise model, but you want a business that pretty much runs itself by the time you’re ready to take early retirement.
Insurance sales can be perfect for that kind of goal due to the recurring income streams. That is, you get a commission, or annuity, on every sale you make for as long as the account is active. Take, for instance, a customer to whom you sell a life insurance policy when they’re 30. As long as they’re continuing to pay premiums for that policy into their fifties, sixties, seventies, and beyond, you’re receiving a commission check. Yes, even in your semi-retirement from the business.
5. A Recession-Resistant Industry With That Recurring Revenue Stream
No business is exactly easy to get off the ground, but once you’ve launched your insurance franchise, the business model can almost keep itself afloat.
First of all, you’re in an industry that probably won’t fail even if the national economy sinks. Think of it. Your policyholders need homeowners insurance if you’re purchasing a residence in any economy, and then keep it in force even in a recession. Same situation with car insurance if you want to stay behind the wheel.
The same can’t be said if you own a franchise in the food and beverage industry, the hospitality or entertainment field, or others in which families can cut back if times get tough.
Another unique advantage is the recurring revenue stream mentioned previously. If you own a steakhouse franchise, you only get paid for that prime rib dinner once, no matter how awesome it is — not continuously over the months, years, or even decades.
That advantage helps you establish and maintain a predictable cash flow. And that, in turn, helps you determine how likely it is that you can add to your workforce, move to larger and more impressive offices, or simply give yourself and others a raise.
6. Regulatory Compliance and Licensing Made Easier
Who’s in your corner when you start a business? No one? A partner, who’s as uninformed as you? That lack of insight, feedback, and expertise would be highly challenging if you weren’t operating in the franchise business model. Especially with all the hurdles you must … hurdle.
Your state’s Department of Insurance has set up education, licensing, and operational requirements that are unique both to this highly regulated industry and to your state. Without the expertise and experience you can count on (or should be able to) from your franchisor, it would be nearly impossible to even know what you need to know, much less actually learning it all and getting properly licensed.
Ask questions of your franchisor representative. How much assistance can you expect in facing these various hurdles? You’ll have yourself a valuable business partner if your franchisor is fully committed to getting you ready to do business as soon as possible.
Ready to Further Explore the Insurance Franchise Model? We Welcome Your Interest in Freeway
At Freeway Insurance, we’re actively looking for ambitious, talented, and motivated franchisees in franchise-ready markets coast to coast. We offer a top-tier training program, assistance in identifying and gaining your state’s certification, and provide ongoing support and guidance 24/7, when you need and request it.
FAQs: Why to Consider Starting an Insurance Business
Here are brief answers to a few of the most commonly asked questions regarding the bottom line on this topic.
Is It Profitable to Own an Insurance Business?
Your odds of success are excellent if your franchisor is successful, your brand is both recognized and respected, and you receive comprehensive training and ongoing support throughout your franchising career.
What’s the Difference Between Franchising and Going the Independent Route?
See above. Only through the franchise model do you get a recognized and respected brand from day one, and the expectation of receiving the training, support, and guidance that will put you ahead of the competition.
How Much Does It Cost to Start an Insurance Franchise?
It varies depending on the brand and where in the country you start your operation. At Freeway Insurance, for instance, your initial start-up costs can range from about $35,000 to $113,000 or so. This includes an initial $10,000 franchise fee and your usual business start-up costs. In addition, you’ll pay a percentage of your commissions as royalty payments for the brand, and often an additional cut to support the national (or international) marketing campaign.
The best way to get clear answers on cost is to ask your franchise representative. To do that, simply go online in search of “insurance company franchisors” or similar search request language. You’ll get verbal answers, and then you’ll see it in writing if you get serious enough to request the franchisor’s legally mandated franchise disclosure document, or FDD.
You’ll own your own company, but with strong brands and expertise behind you. We market Freeway products nationally, and put a name in front of your customers that they know and respect.
Chat with a lowkey but helpful and informed Freeway franchise representative today. Just call us at 1-877-822-3024.
You can also give us your contact information, and we’ll reach out to you.
