Given the projected growth in demand for policies, the question arises – how to open a business in the field of auto insurance, and how much can you earn from it? We will try to answer these questions in our material.
The business of selling auto insurance services attracts start-up entrepreneurs with rather low initial investments and the ability to quickly get involved in the process – even a beginner can quickly figure out the intricacies of implementing OSAGO and CASCO. At the same time, experts predict a significant increase in the volume of insurance policies sold for cars during 2022.
This is due to the upcoming changes in the legislation. Firstly, insurance companies are definitely waiting for the adoption of the bill, according to which the fine for driving with an expired OSAGO policy can increase 10 times – up to 5,000 rubles. Moreover, some lawmakers also propose to toughen the punishment for a repeated offense by depriving a driver’s license.
But that’s not all – at the moment, information is being actively circulated that in the near future law enforcement agencies will “teach” cameras to detect a car moving without an OSAGO policy. If a car with numbers that are not registered with a valid policy in any of their insurance companies gets into the field of view of the recording camera, its owner will receive a “letter of happiness” in the form of a fine.
According to analysts, at the moment about 20 million (!) Cars without OSAGO policies are moving on Russian roads. This is due to the fact that the punishment for driving without a mandatory “car citizen” policy is still small – according to part 2 of Article 12.3 of the Code of Administrative Offenses, this is either a warning or a maximum of 500 rubles a fine.
By the way, the past year 2019 was already marked by the start of the OSAGO reform. Instead of four categories of motorists, they have now divided it into 58, and the tariff corridor has been expanded by 20%.
Given the predicted growth in demand for policies, the question arises – how to open a business in the field of auto insurance and how much can you earn from it? We will try to answer these questions in our material today.
Business registration
In order to start selling OSAGO and CASCO policies, you need to register as an individual entrepreneur. Activity codes to be specified according to the OKVED classifier:
- 65.12. Insurance other than life insurance;
- 66.22. Activities of insurance agents and brokers
Choice of room and location
The best option for a point of sale of insurance policies for cars will be an equipped pavilion based on a container. The area for staff accommodation and the client area is required to be small – three jobs and a sofa for those who are waiting in line will be enough.
The cost of a container already converted for trade will be about 50,000 rubles. Another 10,000 – 15,000 rubles will cost rent in a place with good traffic. It can be a car market or a place next to a large salon selling used cars, and the area next to the MREO is optimal for this area of activity. It is quite logical that the pavilions located in close proximity to the state points of registration and registration of vehicles can boast of the best sales volumes. On weekends, such places are not overcrowded, even despite the presence of a large number of similar points nearby.
To equip the premises, you will need to purchase three office tables, armchairs and chairs for employees and visitors, a compact sofa for the waiting area and computers with the minimum necessary office equipment (it is better to take a separate printer and scanner than an MFP – this will allow several employees to perform various operations at once per hour -peak).
Staff
For the functioning of the pavilion for the sale of auto insurance, it will be enough to hire 2-3 people with floating days off. Usually, peak days of sales are tied to the work schedule of MREO or wholesale market days, which “supply” the pavilion with the main number of visitors. The payroll fund consists of the minimum salary and interest for the issued insurance, usually, it is 25,000 – 30,000 rubles.
.jpg "Auto insurance business: how to make money selling CASCO and OSAGO in 2020")
How much can you earn from selling an insurance policy
The amount of the agent’s insurance premium may vary depending on the region and the insurance company whose policy you have implemented. As indicative figures, we will cite the data from the table on the rosstrah.ru portal, which allow us to roughly estimate how much the sale of one insurance will bring to a microbusiness.
| INSURANCE COMPANIES | AGENT COMMISSION (AVERAGE %) | NUMBER OF CONTRACTS, PCS. | NUMBER OF REFUSALS IN INSURANCE PAYMENT, PCS. |
|---|---|---|---|
| Alpha Insurance | 8.3 | 1 628 173 | 594 |
| VSK | 7.7 | 975 131 | 958 |
| Ingosstrakh | 3.8 | 877 135 | 1 878 |
| MAX | 4.9 | 404 366 | 1 151 |
| Renaissance | 13.6 | 275 960 | 518 |
| RESO Guarantee | 13.9 | 1 409 167 | 1 895 |
| Rosgosstrakh (IC PAO) | 6.8 | 1 122 151 | 3 201 |
| SOGAZ | 4.3 | 880 902 | 976 |
| Agreement | 8.3 | 266 432 | 309 |
| Energoguarantor | 9.5 | 195 453 | 66 |
Thus, you can earn the most on the sale of OSAGO policies of such insurance companies as RESO and Renaissance. The leaders in terms of contract sales in descending order are Alfa Insurance, RESO, and Rosgosstrakh.
Selling e-policies: keeping up with the times
With the advent of electronic third-party liability insurance policies in recent years, some pavilions have also begun to earn money by selling online policies to offline clients. At the same time, not every motorist is ready to issue a policy on the network on their own. Some, due to employment, and others, due to their age, cannot or do not want to deal with the issuance of a “digital” OSAGO – and therefore the pavilion employees can register for them in the online account and issue an electronic policy. For the service, they take an average of 300-500 rubles.
Formally, such mediation between a client and an insurance company is not very welcomed by regulators, but in reality, such a line of activity as the resale of electronic policies is very common among insurers and is proudly called “the service for registering an electronic mailbox, a personal account on the insurer’s website.” Such trade is carried out in parallel with the sale of paper policies.
How an insurer can make money on diagnostic cards
Now let’s talk about another way to earn money, which makes up a fairly significant share in the total income of the insurance pavilion. We are talking about the sale of diagnostic cards. The fact is that when buying insurance, the car owner must have a diagnostic card – and not everyone has it.
As everything should be in theory, the insurer sends the client with his car to a specialized inspection station, where the car is thoroughly checked in all respects for compliance with technical standards.
As usual, everything happens in practice – the client pays the cost of a diagnostic card in the amount of 1000-1200 rubles, after which the insurance agent registers the diagnostic card on one of the specialized sites with paid access. At the same time, the data enters the EAISTO database almost instantly. The cost of one diagnostic card for an insurance agent in a purchase is only about 200 rubles. Thus, the “gray” earnings of insurance agents from the sale of DC is about 1000 rubles each. Interestingly, the registration of the car owner does not matter – a diagnostic card by a client with a residence permit in Krasnodar can be purchased, for example, in the Rostov region – and vice versa.
What else can the insurance pavilion earn on
In addition to selling insurance policies and diagnostic cards, such pavilions offer services for filling out applications for registering cars – this is very important for many customers since not everyone knows the procedure for filling out documents and has free time. Despite the fact that this is no longer mandatory, many still prefer not to do PrEP in writing, but to buy ready-made forms in insurance pavilions.
.jpg "Auto insurance business: how to make money selling CASCO and OSAGO in 2020")
Finally, some pavilions located close to MREO offer turnkey services for setting up cars and assistance in acquiring “beautiful” rooms. However, we will tell about this “gray” market and how it will change soon in future publications.
Sales and Marketing
As for the process of organizing sales, it is far from always being built only offline – many pavilions advertise their services quite effectively online. There are several options for this.
- SMM or social networks. If you constantly replenish your account with fresh and relevant content, you can eventually form a permanent loyal audience of subscribers.
- Word of mouth radio. Also in the sale of insurance policies, the so-called “word of mouth” works great, when satisfied customers recommend your business to their friends, relatives and colleagues. Therefore, it is extremely important to control the level of service provided by your employees so that the entire sales process takes place as friendly and comfortable as possible for the client. To do this, you can periodically attend the point of sale yourself during peak hours or use a video surveillance camera.
- B2B direction. In addition to working with individuals, some insurance agents are also engaged in the B2B direction. They interact with fleets of corporate clients – it is often very convenient for many employees of Car Fleet departments when the entire process of issuing insurance policies for a car is taken over by an insurance agent on a turnkey basis. Working with corporate parks promises good fees due to the large volume of the market, but it will take some effort to reach decision-makers and convince them of the benefits of working with you.
Business risks
Potential risks and threats to business include the following factors:
- Reducing the number of customers due to the transition of many policy buyers to online – policies are bought directly from insurance companies;
- An increase in the number of competitors. It’s no secret that the most “bread” places in terms of the flow of potential customers near the MREO, as well as car markets and shopping centers, remain very attractive to your competitors. And therefore it is impossible to exclude the moment that over time a point will open nearby, which will “pull” some of your customers onto itself;
- The actions of scammers who trade in “auto-setups”. For many, it is no longer a secret that some unscrupulous car owners simulate accidents, after which the insurance company is forced to compensate for considerable “losses”. How does it actually happen? A car of the same brand and model that belongs to the attacker is bought broken in the “total” (that is, for write-off). Then a broken spare part from a decommissioned car is transferred to a whole one, after which an accident is simulated with some other car, which is not a pity (for example, an old Zhiguli, issued to a pensioner). After that, the amount of payment can be several hundred thousand rubles.
However, in the first place, the insurance companies themselves are at risk in such situations, however, there are cases when they can also “ask” the agents who insured the scammers.
- Activation of electronic platforms selling electronic policies online. To date, the most famous are Sravni.ru and StrahovkaRu.ru. However, in the growing popularity of this direction, one can see not only a threat to business – after all, if there is a desire and opportunities, nothing prevents you from ordering a similar site for a moderate amount and starting selling OSAGO and CASCO as an intermediary via the Internet.
Yes, it will take some time and financial investment in such a project, but you will secure your retail business – even if sales fall over time, you can earn your commissions on the online platform.
By the way, one more nuance that concerns not only entrepreneurs but also all car owners – according to the new rules, when buying an OSAGO policy online, the driver is not required to have a printed copy of it. It will be enough to show its digital version on the screen of a smartphone or tablet or even ask the inspector to check the data on the availability of insurance on their own.
Financial indicators
Investments. To begin with, let’s calculate how much it will cost an entrepreneur to open a pavilion for the sale of motor insurance:
- Purchase of a trade pavilion based on a container: 50,000 rubles;
- Payment of rent for a month in advance: 20,000 rubles;
- Purchase of furniture (3 workplaces and a client waiting area): 70,000 rubles
- Purchase of 3 computers and office equipment: 80,000 rubles
- Registration: 5000 rubles;
- Purchase of a cash register: 20,000 rubles.
The total initial investment will be quite modest for starting a business of 250,000 rubles.
Revenue. Now let’s calculate how much a pavilion located in a busy place can bring. On weekends, as well as peak days (for example, weekdays, when MREO works or a wholesale day takes place at the car market), you can sell about 10 insurance policies and 7 diagnostic cards. This is about 15,000 rubles of profit, given that we are talking about tariffs for OSAGO in a million-plus city (do not forget that in settlements with a small number of inhabitants there is a lower coefficient – the cost of the policy and the amount of the agency fee are correspondingly lower). As a rule, there are about 3 such days per week. Accordingly, a “dirty” business can bring in the region of 180,000 rubles a month.
Expenses. Monthly business expenses will consist of the following items:
- FOT: 60,000 rubles (2 people);
- Rent: 20,000 rubles;
- Utility payments (Internet, electricity, security): 5,000 rubles
- Paid access to databases: 5000 rubles
Net profit. Thus, the profit will be halved after paying all monthly expenses, but even taking this into account, the output is pretty good. In total, selling OSAGO and CASCO at a point with good traffic only 3 days a week, you can earn about 90,000 rubles. The most enterprising are simultaneously involved in helping to register a car – this is another parallel direction that generates additional income.
Payback period. The payback period for a point of sale of auto insurance products is about three months. Even if we consider that it will take some time for the business to spin up, in any case, we are talking about a fairly quick return on investment.