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Independent vs Captive Insurance Agent

Captive Insurance Agent

With the proliferation of digital and mobile technologies, the consumer now has more ways than ever to buy an insurance policy. However, regardless of the technology, there are still just two dominant channels to buy insurance, directly from the insurance company or through an insurance agent. If you elect to purchase through an insurance agent, which type of insurance agent should you use? Will you work with an independent or a captive insurance agent?

Let’s spend a few minutes explaining the difference between the two, and the benefits of captive and independent insurance agents.

What is a captive insurance agent?

Captive insurance agents are agents who work exclusively for one insurance company. This means they can only sell insurance policies from a single insurance company or group. This exclusivity can limit the products offered by the captive insurance agent.

In most cases, captive insurance agents can sell both personal and business insurance policies. However, those products will have to be offered exclusively by their host insurance carrier or group.

In some cases, captive agents are employees of the insurance company, and they receive a salary, benefits, and commission for selling policies. However, the average consumer is used to the captive insurance agent who runs an insurance agency on an exclusive selling contract (eg. State Farm or Farmers).

Benefits of a captive insurance agent

  • Product expertise: Because captive insurance agents only work for one insurance company or group, they become very familiar and knowledgeable with the coverage, policy, and benefits. They can provide you with in-depth information about the policies they offer and help you understand the coverage they provide.

  • Awareness: Because captive insurance agents are exclusive to their host insurance carrier, these insurance companies feel secure spending significantly on major forms of direct advertising. Because of this, many consumers are more aware of captive agent insurance carriers.

  • Loyalty: Captive agents are fiercely loyal to their customers. Since they only have one product to sell, they look for unique ways to make the product work for their customers. However, in the end, their success, compensation, and bonus opportunities are tied to the insurance carriers. In some ways, you may not be able to determine where their loyalty resides, with the consumer or the carrier.

What is an independent insurance agent?

Independent agents, on the other hand, are not employees of any insurance company. They are free to sell insurance policies from multiple companies, which gives them the flexibility to offer a wider range of coverage options to their clients. Independent agents are typically paid exclusively through commissions, which are a percentage of the premiums that clients pay for their insurance policies.

Benefits of an independent insurance agent

  • Choice: Independent agents have access to insurance products from multiple companies, so they can provide you with a wider range of options. They can compare policies from different insurance companies and are more likely to find a coverage combination that works for you.

  • Unbiased advice: Independent agents are not tied to any one insurance company, so they can provide you with unbiased advice. They will not prioritize the interests of any one insurance company over your own, so you can be sure that you’re getting the best advice for your individual needs.

  • Cost savings: Because independent agents have access to multiple insurance companies, they can often find you more cost-effective insurance policies. They can compare rates and coverage options from different companies to find you the best deal.

Is there a difference in insurance companies?

Before we answer this question, it’s important to note that independent insurance agents, because of their independence and breadth of product, will frequently specialize. They might become specialists in professional liability, or only sell life insurance and benefits, others may focus on personal or business insurance.

Others may specialize in low-cost, hard-to-place auto insurance. This is called nonstandard auto insurance. Because these types of agents deal primarily in stripped-down coverage for lower premiums, it can be argued that they sell with lesser insurance carriers.

Since IronPoint is a preferred independent insurance agency, with premium-branded insurance carrier partners, we’ll discuss the insurance carrier comparison from our perspective. From our perspective, the insurance carrier comparison with captive insurance agents is comparable. Below is a chart of some of the brands each represents. 

Captive CompaniesIndependent CompaniesWork with Both
State FarmSafecoNationwide
American FamilyLiberty Mutual
The Hartford

In fact, Travelers created the first auto insurance policy, and each of the independent carriers above (all of which are IronPoint partners) has a distinguished and long history.

If you have any concerns or don’t recognize a company, an agent represents, you can always get their ratings from AMBest ratings … as well as the JD Powers rankings.

The bottom line

In the end, the choice is yours. You need to feel comfortable with your insurance agent.

Always make sure you are getting your questions answered, and you are getting a good breakdown of the coverage being proposed. Don’t compromise your protection to get a better price. Insurance is the foundation of your financial plan, it’s important regardless of your current financial condition.

Avoid unscrupulous agents, who lack options, they may attempt to convince you that certain protections are unnecessary just because they don’t have the option to provide them.

The right choice is the insurance agent that looks after YOUR interests and not theirs, who makes you feel comfortable, and who always has time to help. If you find yourself in the market for new insurance, contact us, or you can start a quote online.

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