Determine If You Are Better Suited to Be A Captive Or Independent Insurance Agent
Starting something new is exciting, but it can be intimidating as well. Being an agent is one of the best insurance careers. Business Insider recently reported that despite the rise in machine learning tools, insureds still preferred to talk with insurance agents during the Covid-19 pandemic. Insureds are also more likely to buy insurance if they are talking to an agent directly. Whether you are a new independent agent or thinking of shifting towards becoming a captive agent in a different insurance agency, it is crucial to understand the distinctions between the two types when it comes to insurance sales jobs.
Captive and independent agents are quite similar. The differences that set them apart can mean comfort and success for some, while also meaning difficulties and problems for others. Like yin and yang, both types of insurance agents have their perks and downsides. We all know money and benefits are essential, but not everything when choosing to be an independent or captive agent.
We’ve previously talked about how to get an insurance license. Now, confused about which path is best for you? Read on to find out!
In this blog
The Captive Agent
In simple terms, captive insurance agents work for a single insurance carrier. Their main priority is to build business for that one carrier, and they only sell that carrier’s products and services. They will have an in-depth knowledge of the carrier, the kind of insurance, premium rates, policies, and guidelines.
- Unlike independent agents, a captive agent only works for one insurance carrier.
- They have extensive knowledge of the products, policies, and services of the insurance agency.
- Captive agents have a reliable source of compensation. They are paid a salary, commissions, and provided with benefits.
- The main priority of a captive agent is to build business for the insurance carrier.
Benefits to becoming a captive agent
Many individuals might prefer to become a captive agent as it provides a consistent source of income. It’s often the right choice for agents just starting out. They can learn the ropes of selling insurance while still retaining a stable income. Captive agents usually receive an array of training, administrative work, incentives, and other motivational programs from their carrier.
Since captive agents only work for a single carrier, they gain a comprehensive understanding of the carrier’s specific insurance products and principles. Having detailed information about the company and products makes the agent look confident and knowledgeable, which ultimately helps build clients’ trust.
In addition to not having to worry about an unstable income (which is a real fear for independent agents), captive agents do not have to worry about creating marketing materials for their insurance agency. A captive agent’s carrier will give them marketing materials, so there’s no need to try and come up with something like a logo.
If a captive agent joins one of the prominent carriers today, they become part of an already established brand. The insurance carrier also provides agents with an ongoing list of leads. When customers respond to a carrier advertisement, the carrier directs them to a captive agent local to the customer.
Drawbacks to becoming a captive agent
Perhaps being tied to a single insurance company can be the biggest drawback of becoming a captive agent. Unlike independent agents, you are obliged to the carrier you work for, not necessarily what is best for your client. For instance, some carriers still impose individual quotas for certain products. Even if those products are subpar compared to other products on the market, the agent is pressured to sell it to their client to make that quota.
What’s worse than not being able to provide the needed support to your clients? You are limited to selling what the carrier offers, and what the carrier offers could be at a higher rate than what a client could find elsewhere. Clients may not opt to work with a captive agent because of how little help you are to them.
Consequently, you could lose your client as you are limited to offering them products that don’t suit their needs and budget. As an agent, your job is to make sure your clients are satisfied with your service. If not, then are you truly serving them?
The Independent Agent
Like the saying, “I am a bird that doesn’t want to nest, I want to fly from one place to next,” independent agents are their own bosses! They work as freelancers and collaborate with an array of insurance agencies. They provide clients with different variations of insurance policies and can mix and match to create a custom plan for them. Sounds appealing to you?
- An independent agent can provide their customers with diverse insurance plans and products. This is particularly handy when clients are for example, seeking the best car insurance policy, which has so many facets.
- Independent agents are their own bosses and have the freedom to conduct business however they want.
- They make more money than captive agents on commissions.
- An independent agent can provide their clients with more options and have better pricing and deals than captive agents.
Benefits of becoming an independent agent
In short, independent agents are independent financial advisors. They are client-focused and make sure they select a policy that will provide the necessary coverage at a suitable price. Independent agents serve as one-stop shops. You have quite a few options: Covered by SAGE, Firefly, and Goosehead Insurance Franchise to name a few.
Having a multifaceted portfolio is essential and requires that you have an understanding of the market and network around you. This plays a significant role while selling products as people like to buy from agents who know what they’re doing. An agent who takes the time to understand their clients’ needs and provide them the best coverage for their budget will generate happy clients, which means more referrals!
Unlike captive agents who have to work nine-to-five, independent agents can set their own schedules. This allows them the freedom and flexibility to choose when and how often they work. If you are wondering about how to become an independent insurance agent, there are multiple avenues to build your agency.
Drawbacks to becoming an independent agent
When choosing to become an independent agent, you are essentially starting your own business. Unless you’re a hustler, an independent agent might not be the right choice for you. For starters, you need an office setup, a filing system for your paperwork and a marketing strategy.
However, independent agents have more opportunities when it comes to earnings. Their commission percentage tends to be much higher than for captive agents. It’s also a common trend for groups of independent agents to form their own insurance agency, which can help control business expenses. There are also independent agencies that agents can join to receive the training and servicing support a captive agent receives with the commission split an independent agent receives.
Independent Agents vs Captive Agents
All of us are different, and it comes down to your personality and personal goals. Take the example of an archer. Being a captive agent is like having only one arrow in your quiver. If you miss your target, you’re out of luck. If your product doesn’t fit your client’s needs or budget, you don’t have a lot of options. But what if you are an independent agent and have unlimited arrows? You’ll have a higher chance of hitting a bull’s eye. The pandemic has encouraged the rise in agents opting to switch from captive to independent.
As an independent agent, you can be content with knowing that you can offer what’s best for your client as you also enjoy a comfortable life as a professional. You will be energized and at times, bewildered, by the freedom you will have from your career. Your insurance agency will find success quite easily if you make the right calls.
There isn’t a one-size fits all solution to which type of agent you should be. It comes down to what you are looking for and your personality. Weigh the pros and cons, and eventually, you will figure out what will work best for you and your unique situation.
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