How an Insurance Startup Became Licensed in 50 States.
While thinking of some titles for this article the first one that came to mind was: Walking with dinosaurs. I know that it’s a bit rude to refer to the insurance industry as being older than the Stone Age, but it many respects it fits their outdated technology and systems, not least the process of becoming licensed here in the US. Alas we settled on something a more affirmative, “Licensed to Thrill!” Given this is the emotional outcome we aim to elicit when consumers engage with next generation insurance technology. To realize this vision however, we first needed to become licensed throughout every state in the US. Here is my story …
Let me start by saying ignorance really is bliss! If I had known what I was in for, I am pretty sure I would have pivoted the business model. My ignorance led me forward to roadblock after roadblock, and after significant investments of time (more than 10 months) and money, I realized I had to keep going. In a way this is the entrepreneur’s equivalent to a gambler’s experience of “just one more roll of the dice and I’ll win it all back”.
IT BEGAN WITH AN IDEA … AND AN ACCELERATOR
In February 2015 my brother, Des, and I were accepted into the inaugural Global Insurance Accelerator (GIA), in Des Moines, Iowa. At that point I had no idea where Iowa was and had never even heard of Des Moines. When people ask how I ended up in Des Moines I retort, “I took a wrong turn at Albuquerque.” The GIA is one of the very first insurance-focused accelerator programs; leveraging Des Moines’ reputation as one of the three big insurance cities in the US, to host the program.
Surprisingly, Des Moines is actually a pretty nice city, except for the bitter cold winters (at least from an Australian’s point of view). My brother arrived a few days ahead of me to set things up, and on my first day in Iowa it was -20 degrees Celsius (that’s around 0 degrees Fahrenheit). Despite the awful cold weather, we survived the winter but I vowed never to spend another winter in Iowa.
As part of the accelerator I had the chance to speak with a licensing lawyer who told me if I “solicited, sold and negotiated” insurance then I needed to be licensed. But what did that really mean?
THE FIRST OF MANY TESTS
I came to the simple conclusion that I would have to sit for the property and casualty insurance exams and after that our business would be compliant in no time at all. So I bought some study material online and thought how hard can these exams be? After three days of study I went to the exams and failed both with a 68%, needing to reach a 70% to pass. Doh! Not deterred, I purchased more online training material including practice exams and studied this time for more than 70 hours in a single week and passed with flying colors, averaging 84%.
After passing both exams on May 30th I called the Iowa Insurance Division to find out how to register my exam results and was told that I needed a social security number (SSN), which of course I didn’t have yet. This was a serious problem because you only have 90 days to submit exam results and get the license, and failure to do so on time means you have to do the exam again. I had until August 27th to solve this problem and get my license.
A LOT OF WORK FOR A NINE-DIGIT NUMBER
First, I tried to apply for a SSN at the Social Security office in Des Moines, but they told me that unless I was a refugee, I’d need a valid work visa. Luckily we had already incorporated a company and received some funding, which was going to be essential given our company needed to sponsor my American work visa.
To obtain a work visa I hired an immigration lawyer who helped me put the application together — which was a massive effort, requiring employment contract, education record, several rounds of application documents and finally a trip to Mexico for my visa interview.
Why Mexico? Well you can’t apply for the visa while actually in the US, so I needed to go to another country. I first tried to schedule an appointment in Canada, but the next available appoint was in mid-October and I only had until August 27th to submit my exam results. Another option was going back to Australia, but that would have meant flying 20 hours each way. After a little research, I found out that I could go to Mexico City instead and do the interview there. I also used the trip as an opportunity to brush up on my Spanish skills.
I scheduled my interview for August 19th, which gave me eight days to pass the interview, obtain my visa, return to the US, obtain a SSN, and turn in my exam scores. Needless to say I needed everything to run in a smooth manner. Luckily the interview went well and I got the verbal approval, as all my documents were very well prepared.
Normally you have to wait about a week before you can pick up the visa, though I was able to apply for the fast track process and was told to come back in two days time. I went back to the US Embassy on August 21st and without any problems had the visa nicely stamped in my Australian passport just in time for my departing flight.
On the plane back to Iowa I began to worry about how long would the SSN application take. First thing August 24th I went to the social security office where a lovely lady helped me complete the application. Even though the SSN normally would be issued and posted within a week, after telling her my predicament about the deadline just three days from now, she assured me I would be able to pick it up ahead of time. On the August 26th with just a day to spare before I would have had to redo the insurance exams, I brought my license exam results, the application and my SSN into the Iowa Insurance Division and that afternoon I was the proud owner of a property and casualty Iowa insurance license. Just in the nick of time! Shortly thereafter I applied and was approved to become the designated responsible person for our company’s Iowa entity insurance license.
IT ONLY GETS HARDER
As it turned out obtaining a visa, SSN, and license in Iowa was the easy part! In order to sell insurance to all US citizens and residents I had to apply to the other 49 states and Washington DC for non-resident licenses, for both our company and myself.
I began the application process online, but there were around 30 states that also needed a travel insurance certification that Iowa did not require. For all of these states I had to submit paper applications, passport copies, my new SSN, and checks totaling thousands of dollars. Luckily a letter from Iowa Insurance Division stating that I was qualified to sell travel insurance via my property and casualty license, was included in all applications, which made the process easier for a majority of the states.
For a number of states I needed to establish a business in their states before I could get a license. This required me hiring a registered agent in those states and applying for a Certificate of Authority for our company to operate there.
The states that were the most difficult to work with included New York, California, and Virginia. In New York they rejected my application because I had included a comma in the business name. I used Pablow, Inc. and they said I should have used Pablow Inc. Hence they rejected my application twice for really minor problems. Additionally to sell in New York (but also Hawaii and California) our company also needed to be licensed in accident and health insurance. Once again I hit the books for about 2 straight weeks of preparation and passed the accident and health insurance test with 88% accuracy.
California was challenging not just because of the accident and health insurance requirement, but also because their travel agent license cost over $4,000, whereas the other states were generally between $100 and $300. Similarly, in Virginia your business registration costs $25 for every 10,000 shares your corporation is eligible to issue. Pablow, Inc. had only issues around 170k shares, but it was eligible to issue 1M shares and therefore had to pay over $2,000 just to register as a business, whereas in the neighboring state of North Carolina this cost just $180.
THE HARD WORK PAID OFF
As of March 2016, Pablow, Inc. is finally fully licensed and appointed by three insurance carriers to sell insurance in the United States! While I certainly couldn’t have expected the challenges that an insurance entrepreneur would face when trying to get their business off the ground, it makes our business model stronger and shows our commitment to alleviating the industry’s technology problems. In the scheme of things, what we’ve achieved with licensing is really only a warm up, our ‘license to thrill’ if you like. Now the genuinely difficult part begins of building and scaling a value added business that brings the travel insurance supply chain into the age of data and machine-based personalization.
If you are looking to go through this same process I’d suggest you take a look at these resources: the National Association of Insurance Commissioners’ website, the online National Insurance Producer Registry, Sircon Solutions, Pearson Veu, State Based System and A.D. Banker. Oh, and a good therapist! Also be sure to remember that this is a journey and not an event, so you will need to be patient and roll with the punches!