Welcome to yet another informative insurance article!
We will be comparing two types of insurance agents: Captive vs Independent insurance agents.
The debate has gone on for too long; we hope to help you not just get a satisfying answer, but also make a well-informed career decision about which of them is right for you.
By the time you are done reading through this article, you would have come to a full understanding of the following:
We know you can’t wait, so are we. Let’s dive right in!
Who is an independent insurance agent?
Who is an independent insurance agent?
An independent insurance agent is a freelance insurance agent who is not a full-time employee of any particular insurance company.
Instead, they represent more than one insurance agency, offering their customers several options of insurance agencies with different policies, prices, and terms.
Since they do not work for any specific company, they apply and get approval to market an insurance company’s products and services.
This is what they do until they have a collection of companies that they represent.
However, before an insurance company entrusts its products and services to an independent agent, the agent must prove that it can bring in customers.
They must also prove that they have the skills to market various products and services.
Independent insurance agents usually market various insurance services like:
- Life insurance
- Retirements insurance
- Automobile insurance
- Business insurance
- Health insurance
- Real estate insurance
Because they are not fully employed by an insurance company, they may have just basic knowledge about the insurance company they are marketing their products.
So this is how they work: when people need insurance services, an independent agent searches through various insurance companies that provide that service.
The aim is to provide various options for the consumers to choose from.
The customers can then make their decision based on the advantages and disadvantages, price comparisons, and past accomplishments of the insurance company.
Here is another question: since they are not employed by a particular company, how do they get paid?
They get paid in form of commissions, which may either increase or decrease based on the rate they charge.
Merits and Demerits of being an independent insurance agent
Choosing an independent insurance agency as a career has its benefits as well as challenges. Here they are:
Ability to provide customers with real help: Because independent insurance agents are not tied to a specific company, they have various company policies at their disposal.
This way, personalized attention can be given to each customer according to their current needs.
For example, because independent agents market insurance policies of multiple companies, they can help customers compare prices as well as products before they are required to make their decision.
Apart from getting insurance quotes from several companies, you can also provide answers to the questions customers are asking about the policies, prices, and guidelines.
Customers don’t only want products but also follow up comments and quick solutions to queries. As an independent insurance agent, you can do all these.
Long term customer retention: Independent insurance agents don’t lose customers as often as captive agents.
This is because they help customers get the best after examining the same offers from various insurance companies.
Even if one company decides to increase the price for one insurance policy, customers will simply stay with you because they know you will help them search for a better deal.
Multiple sources of income: Do you remember how independent insurance agents get paid?
They receive commissions based on the number of deals they were able to tie up.
While they do not get paid a stable salary by a company, they have an opportunity to get paid commissions from multiple sources.
Money may not be constant, but with good promotion and marketing, multiple sources of income are guaranteed for hard-working independent insurance agents.
Limited knowledge of policies: Independent agents may have access to various insurance companies, but their knowledge of the products and services they offer is limited.
This is because they do not work with the company full-time.
So, where a captive agent excels in giving an in-depth solution to a customer’s query, an independent agent may only give a peripheral answer.
Limited support from insurance companies: An independent agent must learn to do all the marketing on his own.
No support from any company is to be expected because companies only provide such assistance to full-time employees.
Who is a captive insurance agent?
Let’s start with the question: Who is a captive agent?
A captive insurance agent is an insurance agent that is fully employed by an insurance agent company.
He is the licensed insurance salesperson for the company, and he is entitled to a salary as well as bonuses and other commissions.
While they may not have various insurance options for you to choose from, they fully understand the policies they are marketing to you because they were there right from the genesis of the policy.
However, whether they like the policy or not, they must market the products and services because they must meet certain targets set by the insurance agency they work for.
Captive insurance agents usually have the support they need from the company they represent.
Apart from the financial remunerations due to them, they can also rely on the company for solutions to challenges faced in their line of work.
As a captive insurance agent, you will be tasked with making more profits for the company you work for.
Even if you know that the product is not as great as it sounds, you still must market it and bring in the customer.
The focus is more on what the company will benefit from instead of what is best for the customer.
Merits and Demerits of being a captive insurance agent
Choosing a career as a captive insurance agent has its merits and demerits. Let’s highlight some of them.
More Income: You will make more money because you will get paid your monthly salary from the company you work for.
Many people looking to start a career in an insurance agency ply this route because of the financial stability it guarantees. Whether you seal a deal or not, you still get paid.
Apart from the salary, you are also entitled to commissions and bonuses based on your performance. This is way better than waiting on customers for revenues and bonuses.
Company support: Even though insurance agents must market the company products, only captive agents can get marketing support from their company.
This support can be in the form of referrals, adverts, campaigns, and other promotions either online or offline.
Because the company is already recognized as an insurance service provider, the job of a salesperson becomes all the easier.
In-depth knowledge of insurance products: One advantage captive agents have over independent agents is that they only have to learn about just one insurance product: their company’s.
This way, they have an in-depth knowledge of the product they are marketing.
They have answers to customers’ questions, and they usually record more sales because they know what they are recommending.
Easier to start and own their insurance agency: Since they are used to working solo, it isn’t surprising that most insurance agencies today are owned by captive agents.
Less likelihood of satisfying customers: Customers have various needs, and sometimes the product and service that a captive insurance agent offers may not be what the consumer needs at the time.
This is one major talking point in this debate of which is better between a captive and independent agent.
At other times, the products may be good, but what if the price is not affordable for the consumer?
Because it is like one-way traffic, the consumer may have to search for something within their budget somewhere else.
The situation creates some confusion because no matter how much the agent wants to help the client, they can’t because they are limited by their company.
Meeting up with sales quotas: Captive agency is not the easy way out; you must meet certain contract targets in order to remain an employee of a company.
Does that sound strange? No matter how weird that sounds, that is the truth.
The number of customers they bring in will strongly influence how many commissions and bonuses they get paid.
Apart from that, even if you know that some services may not be what your customers need, you just have to market the products.
This is because your continued stay in the company depends on making the ideas appealing and acceptable.
That is another advantage that an independent insurance agent has over a captive agent. They do not have any target to meet.
Keeping Customers: Captive insurance agents can find that retaining a customer in the books of their company is quite challenging.
This is because companies change policies, prices, and even rebrand their products from time to time.
If the product rebranding isn’t what the consumers need, they may simply decide to shop for the same product in another insurance company.
This non-renewal will make it difficult for captive agents to reach their targets, which will eventually affect some of their financial remunerations
There is little or no opportunity to start your business: Captive independent agents are hard-working.
They help to drive traffic into a company, help promote the latest insurance services, and are indispensable to the company.
However, there is a higher chance that a captive agent may not have the time to look inwards towards starting a business of their own.
Their efforts are towards improving the company, and as they put in more effort, the company will keep setting new targets that they must meet.
There is little or no time to think about starting their own business.
Captive vs Independent Insurance Agent: Which should you choose?
The simple answer is that you can choose any of them. If you want a more stable flow of income, a captive insurance agency will get you on a company’s payroll.
While many others want money, they prioritize satisfying clients over their need for money. For that, they choose to start with being an independent insurance agent.
Another perk of being an independent insurance agent is that it makes it easier to stay up on your own.
Before long, you just might own your business.
With this amount of information, it is a question of when to start, and no longer what to do.
This shouldn’t even be debated; you can choose to work as either an independent or a captive insurance agent.
However, having considered the pros and cons of each, you should already be thinking about which is best for you.
The answer is simple, the career path you want for yourself is what will determine which insurance career route to go.
Insurance agencies are quite profitable; however, you must tap into the right channel.
We hope this article has really helped you to understand which way to go.
One more thing: we want to see you succeed.