Captive Agent vs Independent Insurance Agent

Written by: Ethan Peyton

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Captive Agent vs Independent Insurance Agent

Anyone considering starting their own insurance agency will have to decide between being an independent insurance agent or a captive agent. Both types of insurance sales professionals have their advantages and disadvantages, which makes the final conclusion a very personal one. Before you make your choice, you should become familiar with both types of agencies and learn all of the information you will need to know to make an educated decision.

Tip: Doing a pre-licensing education course dramatically increases your chance of passing your exam on your first attempt, which can end up saving you both time and money in the long run.

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What are Captive Agents and Independent Agents?

A captive agent and a non-captive insurance agent both sell insurance products to a wide variety of customers. Both go through the training to become insurance sales professionals, and they must carry the required licenses for the types of policies they wish to sell

Both types of agents can sell any form of insurance to any type of customer, and they can solve problems for them by using their knowledge and their product lines. Additionally, in both cases, there is that sense of satisfaction in knowing that they help people by providing them with the insurance protection they need.

Captive and independent insurance agents can enjoy lucrative careers and can be recognized as respected members of their communities and enjoy the benefits of being licensed agents.  However, the differences really begin to show up when a closer look is taken at who each agent works for and how they conduct business.

There is no right or wrong type of insurance agent. Both captive and independent insurance agent arrangements have unique benefits and challenges. It is up to you to decide what your business goals are, and then select the option that best meets those goals.

What is an Independent Insurance Agent?

An independent insurance agent is an entrepreneur who runs their own office and chooses which companies they want to represent. They set their own hours, determine the ways in which their business should be marketed, create their business’ public image and make all of the decisions regarding what products are used to satisfy a customer’s needs.

Benefits of Being an Independent Insurance Agent

Most of the benefits of being an independent insurance agent are derived from the ability to make your own business decisions. You can choose what companies to represent, based on the products and pricing they offer. This will allow you to provide high-end insurance to people with significant financial resources, as well as to offer quality low-cost solutions for other clients. When you want to offer a line of insurance that you currently do not carry, you must simply find a company that provides it and begin writing for them.

As an independent agent, you can sell any type of insurance products you choose. You can sell commercial as well as personal lines, you can insure luxury items such as collector cars, and you can get into the lucrative business of corporate benefits.

Additionally, you can also opt to sell niche products that will open your business up to more potential customers. Products such as vacation home insurance, travel insurance, and watercraft insurance can help you to sell into customer groups where other agents might not be able to provide coverage.

As an independent agent, you will work with almost no micromanagement from the carriers you represent. As long as you are writing business within their guidelines, you don’t have to worry about fulfilling others’ goals of profit margins or sales volume. You have no sales quotas to worry about, and you can book as much or as little business as you desire.

Challenges of Being an Independent Insurance Agent

Life as an independent insurance agent is full of responsibilities. You are fully accountable for every aspect of running your own business. You must manage your employees, balance your books and make all of the other important decisions that can affect your business. You can, however,  decide whether to outsource certain tasks or take time out of your day to do them yourself.

As an independent agent, you will receive little-to-no marketing support from your carriers. While your carriers might run national or regional marketing campaigns, your business will not be directly involved in those campaigns. You could be doing business with lesser-known carriers, which means you’ll have to rely solely on your own ability to market your agency to bring in clients.

When you deal with carriers as an independent agent, you are not an employee. This means that you will need to find your own, health insurance, retirements savings, and other perks of a standard job. If you fire employees, you will find that you may need to provide those things for them as well.

On the financial side, the commissions from smaller carriers depend from company to company but are generally higher than commissions of captive agents. You probably won’t find as many creative incentive plans through an independent agency, however.

How to Become an Independent Agent

The first step to becoming an independent insurance agent is to get all of the proper licenses required by your state. This includes life and healthproperty and casualty, and your Series 6 & 63 licenses for securities and any other business licenses you need to run your business.

Once you are an officially licensed agent, you can then set up your legal business entity in the way that is best for your individual company needs. After establishing your business, you will need to start signing up carriers to represent. Be sure to do plenty of research on the carriers you wish to sell for, and look at as many as you can before making your decisions.


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What is a Captive Insurance Agent

As a captive agent or exclusive agent, you will work for only one carrier. The captive insurance agent definition revolves around the idea that you are exclusive (captive) to just one agency.

The Benefits of Being a Captive Insurance Agent

As you begin to learn more about being a captive agent, you realize that it all depends on the company you choose to represent. In all cases, your business is backed by a large insurance corporation with a national (and possibly international) presence. That strong marketing identity can be a big benefit to your agency.

The compensation package offered by each carrier varies, but many include base salaries, bonuses and full corporate benefits. There can be strong financial incentives to working solely for one insurance company.

In most cases, instead of being a self-employed independent agent, you would be an employee of the company you opt to represent. With standard benefits, your state and federal taxes will be taken out with each check, have the backing of a company when you apply for personal or professional credit.

As a captive agent, you probably won’t have to worry about setting up a legal entity, because in most cases your company will take care of those decisions. Your corporate owner will also provide you with operational support, such as accounting, recruiting and training. Plus, you can use all of the tested and proven computer systems the company already has in place.

From a business perspective, perhaps one of the most significant benefits is that you start on day one with a recognized name with millions of marketing dollars per year behind it. Most companies will also allocate your agency money to run branded local advertisements.

The Challenges of Being a Captive Insurance Agent

In most cases, your clients belong to the company you select. You are able to build your business as you want, but all of those clients and the business you book every year will remain the property of the company you represent.

A captive agent must follow all of the guidelines and rules of the company for which they work. This means that you might have to maintain a minimum number of employees, regardless of your need, and you may need to pursue additional licensing. You are not your own boss, and you might have to work hard to achieve corporate goals that do not match your own. However, you will be able to enjoy the freedom of running your own agency.

How to Become a Captive Insurance Agent

In most cases, you will begin this process by discussing the possibility of opening an office in your area with an insurance company. If you are approved to open an office, you must then acquire all of the licenses required by the state and by the company you select.

From there, you will receive step-by-step instructions on how to open and run your agency.

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