The process of starting an insurance company within one of the most tightly controlled states isn't easy. Here's how to start an insurance business in California
California is home to one of the most stringent insurance laws across the US. It's no surprise that establishing an insurance company in the state isn't a easy feat.
To benefit you make sense of the process, Insurance Businesswill provide a step-by-step guide of how to set up an insurance business in California. We'll also provide details on the various requirements and departments you will require to collaborate with.
If you're ready to take on the difficult task of running an insurance company in one of the nation's most tightly controlled states, the following guide will benefit. Find out how to set up an insurance business within The Golden State.
A step-by-step instruction for starting an insurance business located in California
The potential for growth associated with operating an insurance business is what makes it a lucrative option. But starting your own insurance company in one the most restricted states in the nation requires meticulous research and planning.
This is a step-by-step procedure for starting an insurance business in California:
1. Get an insurance name endorsed.
The name you choose for your company represents your company and image, so it has to be considered carefully. Once you've chosen a name then you need to send your name application in the Corporate Affairs Bureau of the California Department of Insurance (CDI) at this address 1901 Harrison Street, 6th Floor, Oakland, California 94612.
You are able to provide up to three names in the order of preference. A statement of the principals of your business must be included in the form of a request. Additionally, you must submit a name authorization charge of $150. If you are a joint underwriter fees are $79.
2. Filing the articles of incorporation.
After your company's name is approved, you will need to complete the incorporation documents at Secretary of State California Secretary of State. Other than the business name you must deliver the following information:
- your address for business (cannot be an address that is not a P.O. Box)
- Registered agent information, including addresses and names.
- Your business structure
- information about the directors' board in the event that they are relevant
- The number of shares the company will issue, if applicable.
Filing is subject to a fee based on the business structure. The complete list of fees as well as timetables for filing on the Secretary's site. The most efficient method of filing the articles of incorporation for your business is via the Secretary of State's Bizfile online website.
3. Apply for an organization's security permit.
The CDI requires all insurers with a state-based base to obtain an corporate securities permit. As per the insurance state regulations department “this license permits selling of shares to raise the initial capital as well as excess.” In simple phrases, this permits you to raise capital needed to establish your insurance business in California.
The application, along with all the required documents, should be submitted to CDI. The department states that the mandatory documents include:
- complete biographical information about directors and officers
- Plan of operation for the business
- an estimate of the anticipated income and expenses for a set number of years
The department of state insurance regulation created the checklist that outlines the steps and procedures for getting an organization's securities permit.
The CDI acknowledges it is “not intended to be an exhaustive list of all requirements. The applicant must still adhere to the relevant laws and regulations.” That means you might be asked to provide extra documentation or satisfy other requirements that aren't in the list.
After all the requirements have been met after which the department will examine the application. After your permit has been approved and you have received approval, you can go ahead to following steps.
4. You must obtain a certificate of authority.
All insurance companies that wish to conduct business in California need to obtain an authority certificate prior to being able to operate legally. This lengthy process comprises three stages that last between a week and sixty days:
Application
Durée: One week
The CDI evaluates the request in order to assure that it is filed in a proper way. Within this time frame you will be informed by letter whether your application has been approved for filing. If it is accepted, you will receive the “official file date.” Should it not be accepted then you will be given 10 days to file your application in its entirety.
If you're not able to finish your application within the specified time the application can be returned. As per the Department, it's not allowed to hold incomplete applications longer than 10 days due to the huge quantity of applications it receives.
Stage I Review – Prequalification
Durée:30 days
In the course of the prequalification review the CDI will conduct a preliminary examination of your insurance business's operational and financial condition. This review is conducted to determine if you're in compliance with the minimum requirements of California's statutory requirements for insurance companies.
Here's a brief list of what the insurance regulatory department will look at during this time:
The CDI will inform you by letter prior to the 30th day following the date of your filing if your company has passed the first stage of review. If your company is deemed to be qualified the application will get on with towards the ultimate review of qualification.
If your company is not able to meet the requirements for the program, you will receive an email with the reasons for your failure and some suggestions to benefit you to meet the criteria if you choose to reapply. Your application could also be cancelled.
Stage II Review – Final qualification
Time: 60 days
This phase involves reviewing and acceptance of extra corporate, financial as well as legal obligations. Here's a brief list of what the CDI will look at during the final qualification phase
When this review time, you'll receive either a certification of authorisation or written note informing you of each item that was not able to satisfy California's admission requirements. If the former is the case you'll be provided with an opportunity of two weeks to correct all the deficiencies. If you are able to rectify any deficiencies, you'll receive your certificate of authorization after two weeks.
If two weeks aren't sufficient to finish the application process, then you could be granted additional time to complete your application. extra 15 days within which you can finish it. Once your application is complete your application, the CDI will examine the application in 30 days, and either issue an official certificate or notify you that did not meet the requirements to be admitted.
Read this step-by-step guide to how to begin an insurance business If you're looking to learn more regarding how to begin your insurance company.
What are the licenses you require to establish an insurance business with in California?
If your insurance firm is involved in selling policies, it must obtain an insurance license to be able to do business legally. There are two types of insurance licenses that you can obtain:
1. License for a resident insurance agency
This kind of insurance license permits you to sell insurance policies across the state line. It is similar to an insurance agent license, but at the business level. This step-by-step instruction on how to apply for an insurance agent's license will benefit when you are looking to join an agency to benefit you get towards starting your own business.
2. License for an insurance agency that is non-resident
If your insurance company is located in another state, you'll need a non-resident's license. The positive side is California does have reciprocity arrangements with states. This permits insurance companies outside of state or agents to request licenses, without having to pass the state licensure examinations in California.
Does your company require separate licenses to sell various types of insurance for sale in California?
As a business owner you are able to select various insurance lines that you can focus on. If you intend to sell policies across multiple lines, you will require an appropriate licence for every. The licenses have corresponding costs and conditions.
Here are the most popular types of insurance licenses that are available in California. These descriptions are based on the CDI's terms:
License for health and accident insurance
Your business can bring insurance policies that cover bodily injuries, sickness and accidental deaths. Additionally, you may be able to provide disability insurance.
Cargo shipper insurance certificate
This is mandatory if your insurance provider offers the cargo owners and shippers with protection for the cargo they're transporting.
Licence for insurance on casualty
This will allow you to add insurance against legal responsibility. This covers any act that outcome in disability, injury or death as well as property loss.
License for credit insurance
This permits your company to provide credit insurance without having to obtain a life insurance or property and casualty licence.
Life-only insurance license
This allows you to provide the life-insurance policy. Insurance coverage could include accidents that cause dismemberment or death, annuities disability benefits and endowments. The majority of life insurance companies also provide health and accident insurance.
Life & Disability Insurance Analyst license
This is required by insurance companies with analysts who provide advice on disability and life insurance contracts.
License for motor club insurance
This allows your company to market and arrange coverage on behalf an appointed motor club.
Insurance for property
Commonly, taken in conjunction with a casualty permit, an insurance license for property lets you provide insurance policies for any “direct or indirect” loss or property damage.
Special lines' surplus lines insurance license
This permits insurance brokers to take on the following risks on non-admitted insurance companies that offer protection for:
- Risks associated with aircraft
- Marine navigation, transit or transportation risk that covers products, merchandise and other personal property
- the property or operations of railroads that are involved in interstate commerce
Surplus lines insurance license
This allows insurance brokers to put insurance on non-admitted insurers to protect against risks beyond aviation and certain transportation and marine risk.
Find out more about the various licensing requirements for insurance agencies required to be able to operate throughout California by reading this article.
You can establish an insurance business in California without an insurance licence?
California legislation requires all companies who provide service or products for insurance to obtain the required licenses. In the event that an insurance company is operating without the proper licenses could be a criminal offense. If your company is found guilty in this manner, you could face serious penalties, including financial fees as well as blocked commissions. Also, you could have your license to operate removed or suspended.
Additionally in addition, the CDI could issue cease-and-desist notices to stop your insurance business from carrying on its business. In the event of this you could be obligated to pay any outstanding insurance claims.
Does the ownership of an insurance company profitable?
People are always seeking the appropriate coverage – whether it's driving their cars, running businesses, buying homes or seeking medical assistance. This is why the insurance industry's products and services will be sought-after.
The continuing expansion of the industry presents an exciting opportunity for those who want to become insurance entrepreneurs looking to set up their own business. To make a profit it is essential to work hard and commitment.
If you're looking to find industry players to take inspiration from the past, the finest in Insurance Special Reports page is the best place to be. Recently, we announced the five-star winners from the fastest-growing insurance Companies at the USA awards. Find out how these companies have come up with creative and creative ways to expand in spite of the difficult market conditions.
Is the idea of establishing an insurance business in California an excellent idea? Tell us your thoughts on the subject in the comments.
