In the United States, there are two different types of insurance agents: captive insurance agents and independent insurance agents. Whether you are an independent or a captive insurance agent, this can seriously affect the kind of insurance you sell, your regular routine, and your income potential within the insurance industry. Now, let’s understand these types of insurance agents and the difference between captive and independent insurance agents.
Captive Insurance Agents
Captive insurance agents, also known as exclusive agents, are contracted to sell insurance policies from only one company. In return for exclusive agents agreeing to sell only their policies, the insurance companies usually provide their agents with support, including providing them with access to the administrative staff and setting them up with an office. When a prospect contacts an insurer about buying an insurance policy, they will often refer them to an exclusive agent working in their area.
Independent Insurance Agents
Independent insurance agents don’t work exclusively with any specific insurance companies. So, they can sell policies with different insurance companies and shop around to find their clients the best insurance rates for the best coverage suited to their needs. However, independent insurance agents are usually not permitted to sell insurance policies offered by insurers who rely on captive agents. They often sell their policies through their own insurance agents exclusively.
Captive and Independent Insurance Agents: What’s the Difference?
The primary difference between independent and captive insurance agents is in compensation. Generally, independent agents get a bigger portion of the insurance sales they make. However, they are also responsible for paying for all their overhead, which means they will likely spend most of these earnings on their independent business operation. As for captive insurance agents, they get lower commission rates, which is a tradeoff they made in return for the insurance company they are working with to cover their overhead. Also, captive insurance agents are often paid a salary in addition to their commissions.
Another major difference between the two insurance agents is the number of options available. As discussed earlier, captive insurance agents can only sell insurance products from their insurance company, while independent insurance agents can offer their clients insurance policies from multiple insurance providers, allowing them to provide a more comprehensive selection of insurance coverage options.
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