Captive vs Independent Agent: Exploring Careers in Insurance

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Most people know that searching for the best insurance policy for your needs entails being in contact with an agent. Something many people may not know is that there are different types of insurance agents. There are captive agents and independent agents. 

These two types of agents may seem very similar, but they have pretty significant differences. The type of agent that’s best for you depends on your needs. Let’s take a look at what captive and independent agents are, as well as the pros and cons of each one.

What is a captive agent?

Captive agents are those who sell policies from only one insurer. These agents are experts at knowing the different policies, discounts, and coverage add-ons for the one carrier. Most major insurance companies like State Farm and Allstate use these agents. 

The company that a captive agent works for will provide the agent’s total compensation, which is a combination of base salary, commissions, and benefits. Captive agents can be either employees or independent contractors.

Since captive agents earn a commission for each sale, client satisfaction is pretty important to them. Their commission rates are lower than that of independent agents because they are paid a salary as well as receiving financial assistance with costs such as advertising and hiring.

Working with a captive agent can be helpful for someone who is buying insurance for the first time, or for someone who is unsure of how much coverage they need.

What to Consider Before Working as a Captive Agent

Before jumping into working as a captive agent, there are some things to consider about salary, personal growth, and more. 

Pros of becoming a captive agent are:

  • Financial safety net from the insurance company: Even though captive agents make less money than independent agents, it’s still something to fall back on
  • Guidance and training from experienced insurance companies: Working with a company that has been in its specific field for a long time is a great way to become familiar with the field. They can provide you with leads, marketing, and other advertising as well.
  • Knowing and understanding the product you sell: When you sell only one type of coverage or product, you’ll end up being quite knowledgeable about it. As your experience grows, you can easily master what you’re selling.

Cons of becoming a captive agent are:

  • Being limited to selling one type of product: While being limited to one type of service is a pro, it can also be a con. This can cause your work to become monotonous or boring. It can also prevent potential clients from working with you if you only sell one type of policy.
  • Lack of personal growth as an agent: Many clients who work with captive agents do it because they are comfortable with the parent company they work for. You’ll get a lot of knowledge and skills while working under an agency, but if you were to stop working for an agency, you’d be starting over.
  • Meeting sales quotas: Every insurance company has sales quotas that their captive agents must meet. This is beneficial for their company but can be difficult for you to achieve as an agent. In many cases, you can only make a commission after meeting a certain number of sales. 

While many prefer to work as an independent agent, working as a captive agent can be appealing for someone who doesn’t mind being limited by one type of policy and working under an agency.

What is an independent agent?

Independent agents differ from captive agents because they aren’t contracted to work with just one company. Instead, they work with and offer multiple companies’ products and services. Independent agents are their own boss, so they can manage their business however they would like.

Many people prefer to work with independent agents because they can provide their clients with the most options. It’s a lot easier for consumers to choose an affordable policy that still suits their needs. Independent agents are also less expensive to work with since they don’t have a parent company to support them.

What to Consider Before Working as an Independent Agent

Just like being a captive agent, there are some aspects of it to consider. One of the biggest is the fact that you are working for yourself, which can be daunting to many.

Pros of working as an independent agent:

  • Selling products and services from multiple insurers: You can create your own custom plan that can be marked at a competitive price. You also have more policy options to help your customers shop around and find their best option.
  • Earning higher commissions: Independent agents don’t work under an agency, so insurers don’t need to house them or provide income support and employee benefits. This gives independent agents a higher commission. They also have the option to work with the highest-paying insurers. 
  • More control over how to run your business: Being your own boss means you control every aspect. You can choose your own hours, who you work with, and your own goals. Working on your own schedule is a plus for many people.

Cons of working as an independent agent:

  • Generating your own leads and marketing: Marketing your insurance agency and generating leads can be difficult without the help of a parent company. Independent agents have to pay for all the marketing with their own money.
  • Having to learn about multiple companies’ products: Working with multiple agencies means they have to learn the ins and outs of many different companies and their products. An independent agent may not have the mastery that a captive agent has.
  • Higher startup cost: Since independent agents don’t have a parent company to assist them financially, it requires a decent amount of startup capital. You have to consider where you’re going to operate from, how you’ll get your licenses, and more.

Is one type better than the other?

When it comes to captive agents versus independent agents, there is no case where one is always better. It’s important to consider how much money you want to make as well as considering what kind of learner you are. 

The biggest difference between the two agencies is how much money they can earn. Working solely on your own time and money as an independent agent can be intimidating for some.

If you can’t imagine yourself keeping track of many different agencies’ policies or using an insurance comparison table, then working as a captive agent might be best for you.