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What is the Difference Between Captive Insurance Agents vs. Independent Insurance Agents?

Should I Become an Independent Agent or a Captive Agent?

The answer to this decade old question is, it depends.

Let’s first outline what makes each of these approaches unique and more importantly why you may see one approach as more valuable for your situation.

Captive Agents

Major insurance carriers like Farmers, Geico and State Farm, to only name a few, use captive insurance agents to sell their products. As part of the relationship between the captive carrier and the captive agent, agents in these positions can typically only sell the carrier's product lines and cannot offer additional options to their clients.

Having few product lines usually is advantageous to the captive agent as they are able to specialize in these products and are well versed in policy coverages and discounts. Additional items that distinguish the captive agent.

Training: Highly trained on their insurance company’s products, coverage options, policy guidelines and claim submission processes.

Compensation: New agents are often provided a salary or draw for a period of time when starting their agency to support them financially while they build their agency.

Commission: Nationally, commissions for a captive agent are 6-10% with profit sharing reserved for the larger more productive agencies.

Close Ratio: Amount of quoted policies that result in a bound transaction is typically around 15-25%.

Ownership & Control: While captive agents may have a buyout from their carrier, they do not own anything. They are not free to do whatever they choose with the book of business they have built, nor can they operate their business as they choose to.

Lead Generation/Marketing: Operating under a single carrier with a recognizable brand has its benefits and often results in leads from the company’s marketing initiatives.

As important, captive insurance companies often hire new agents from universities, sales and management professions that are not tied to the insurance industry. This approach often eliminates onboarding more experienced agents with “bad habits” and allows them to focus their company training on helping the agent become experts at marketing and selling their products.

Independent Agents

Independent agents are “business owners” and work for themselves. They are

not exclusively contracted to work for one single insurance company and can sell policies from multiple providers. Oftentimes, independent agency owners represent 20-30 carriers dependent upon their market availability. One of the major advantages of being independent is the agent can shop around to find their customer’s the best coverage for the best rate. The following items are applicable to the independent agent:

Training: Independent agency owners that are not with an alliance or group have access to carrier-level training but will be required to invest in their own specialized training to expand their product knowledge.

Compensation: There are multiple lines of revenue available to the independent agent to include commissions, incentives, bonuses, profit sharing and enhanced compensation for the larger agencies. However, as a business owner, independent agents only receive compensation for activity. If you are receiving a salary, it is likely you are not the agency owner as an independent.

Commission: While captive agents on average receive 6-10% commissions on policies sold, the independent agent can receive 12-20% based on the type of policies written.

Close Ratio: Amount of quoted policies that result in a bound transaction is typically around 40-50% due to the fact that independent agents have more markets to find their clients suitable coverages at the best pricing.

Ownership & Control: Independent agents own their books of business and can transfer or sell the business to whomever they choose. Independent agents that are with an aggregator, in some cases, have unknowingly or willingly given the aggregator the control of their book ownership and are subject to the contract terms of their sponsor.

Lead Generation/Marketing: Unlike captive agents, independent agents are the business owner, the marketer, and responsible for generating their own activity. While many captive carriers provide this level of support, they do so at a cost of reduced commissions.

So, which one is better? Captive or Independent?

This question is difficult to answer because much of it depends on where you are today in your career. If you are a newly licensed agent you may be able to greatly benefit from the support and training provided by a captive relationship. If you have plenty of experience and a track record of production you will likely see the value of higher commissions and less oversight that an independent arrangement offers.

There are options to achieve the best of both worlds.

One of the greatest challenges of becoming an independent insurance agent if you previously worked as a producer or a captive agent is getting carrier appointments. Independent insurance carriers are taking a risk on “you” when they provide you an appointment. In turn, to get an independent appointment, you will often need production history or a business plan to give them confidence you are capable of managing and using the appointment with their interests in mind.

In addition to getting appointments and selling policies, you are now a “business owner”. That means you are responsible for rents, accounting, compliance, marketing, training, payroll, HR, appointments, business licensing, carrier interaction (for each appointment) and analytics all while trying to sell and make money.

We created Pacific Crest Services to help agents reduce and/or eliminate the burden of running a business so they can focus on sales and growing a business that will benefit their families and the communities they serve.

To learn more about how we can help you on your path to independent, visit:

Article Written by Heather Orchard, Marketing Specialist #Insurancealliance #insurancebroker #insuranceaggregator #startanindependentinsuranceagency #howtobecomeanindependentinsuranceagent #independentinsuranceagent #licensedinsuranceagent #insuranceagent #Insurance #BestIndependentInsuranceAgency #Insurance Alliance #InsuranceAgency #ohioinsuranceagent #georgiainsuranceagent #newmexicoinsuranceagent #alabamainsuranceagent #idahoinsuranceagent #washingtoninsuranceagent #utahinsuranceagent #californiainsuranceagent #arizonainsuranceagent #nevadainsuranceagent #coloradoinsuranceagent #montanainsuranceagent #oregoninsuranceagent #texasinsuranceagent #kansasinsuranceagent #wyominginsuranceagent #missouriinsuranceagent #arkansasinsuranceagent #louisianainsuranceagent #floridainsuranceagent #kentuckyinsuranceagent #tennesseeinsuranceagent #delawareinsuranceagent #marylandinsuranceagent #connecticutinsuranceagent #minnesotainsuranceagent #michiganinsuranceagent

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