Let the Competition begin, the captive insurance agent vs the independent insurance agent
As a consumer you now have more ways to purchase an insurance policy than ever before. Much of this is due to the proliferation of the internet.
You can purchase you policy direct from the insurance company, using the phone or online, or you can consult an insurance agent.
So, this brings us the age old question, should you use a captive insurance agent or an independent insurance agent?
Which is better, captive insurance agents or independent insurance agents?
I guess this really boils down to the type of shopper you are, if you like the dealer option (where you have just one choice), or the retailer option (where you have selection).
Captive insurance agents are more like dealers, they have contracts with a single insurance group, and sell the products and services that the contracted group offers under an exclusive agreement. Examples of captive insurance agents are those who sell for State Farm, Farmers, and Allstate.
Alternatively, independent insurance agents are more like a retailer, like a supermarket or box store. Independent insurance agents are free to work with the insurance companies that they feel offer the best value for their niche market or the customer segment they choose to service. Examples of the types of insurance companies that distribute products through independent insurance agents are, Travelers Insurance, The Hartford, Mercury Insurance and Progressive.
So, you see, it’s not about which agent is better, both are good, caring, and understand insurance, it really comes down to what products are being offered, and the choices you have as a consumer. The captive insurance agent is limited in what they can offer a consumer, and the independent insurance agent can provide variety.
Why is Choice better?
If you are purchasing your insurance from a State Farm insurance agent, they may have the right products for your home, auto, life & business. And each may have the right level of protection at a competitive premium. But, not all insurance companies are best at each line of coverage. That’s just the reality. So it is likely that one or several of these products are either deficient in coverage or not competitively priced.
What does this mean for you as the consumer?
That you either are going to over pay or not be properly insured.
Alternatively, since an independent insurance agent is not exclusive to single insurance group, they can shop the market and get products that line-up, with greater precision, with your coverage and price needs.
A great example of this comes from our insurance agency, for years Mercury Insurance has be very competitive for auto insurance, and Travelers has had a wonderful home insurance product with excellent coverages. Our agents would package these two products to offer the consumer the best balance between price and protection available.
Because Mercury and Travelers have comparative advantage in each of these line coverages, we are able to help consumers, even those who are getting multi-policy discounts from the current insurance carrier.
What are the benefits of a Captive Agent?
While the independent insurance agent has the comparative advantage in that they can offer the consumer real choice, the captive insurance agent has the advantage of having greater depth of knowledge in their product … this is because it’s all that they sell.
This isn’t always true, however; many independent insurance agents will take a limited number of insurance carrier appointments had can match the captive insurance agent’s depth of knowledge.
Another advantage that the captive insurance agent has is that their insurance carrier will advertise, and in some cases advertise directly for the insurance agent. Independent insurance agents, because they are independent, don’t generally get the same marketing support that the captive insurance agents get from their insurance carrier relationship.
Are the captive insurance agent insurance companies better?
This is an easy question. No.
While there are some lesser insurance companies, and many of these do distribute through the independent insurance agent, the premium branded insurance carriers distributed by independent insurance agents, like Travelers, Mercury Insurance, The Hartford, and Progressive, are all highly rated, and financially secure insurance companies.
Travelers created the first auto insurance policy, and each of these carriers have distinguished and long histories.
Because the captive insurance agency companies advertise, and they are good companies that also have excellent financial security and distinguished histories, consumers tend to recognize these brands easier. But recognition does not make the insurance company better.
If you have any concern, or don’t recognize a company, a good independent insurance agent can provide you a backgrounder and the AM Best ratings … as well as the JD Powers ratings of their insurance companies.
Who will you choose?
In the end, the choice is your. You need to feel comfortable with your insurance agent.
Always make sure you are getting your questions answered, you are getting a good breakdown of the coverage your being offered. Don’t compromise your protection to get a better price. Insurance is the foundation of your financial plan, so it’s important regardless of your current financial condition. Avoid unscrupulous agent, who lack options, they may attempt to convince you that certain protections are unnecessary or overkill.
The right choice is the insurance agent that looks after YOUR interests and not theirs, who makes you feel comfortable, and always has time to help.