What Is a Captive Insurance Agent?

March 30, 2022
By: Voldico

Want to be a captive insurance agent? Learn more about this type of agent and how they do business before making your final decision.

Captive insurance agent. It sounds like a hostage situation! It's not. Captive insurance agents, also called dedicated agents, are insurance agents who only work for one insurance company.

Independent agents are agents who can choose products from many insurance companies to meet customer needs.

Suppose you're just starting your insurance career. In this case, it's essential to know the differences between these two types of agents, so you can decide for yourself whether you'd prefer to work as a captive agent or an independent agent. Making the right decision for you can impact your professional happiness and success in the insurance industry. Here's what you need to know.

Differences Between a Captive and Independent Agent

Captive Insurance Agent

A captive insurance agent works for one insurance agency and only sells insurance policies/products from that agency. Typically, major insurance companies (State Farm, Allstate, etc.) use captive insurance agents to sell their products.

These agents are true experts in these products because that's all they sell. Dedicated insurance agents can easily walk first-time clients through product offerings to get them to an insurance package that works for them. Captive insurance agents are paid a salary, enjoy financial assistance for advertising and hiring, and thus earn lower commissions than independent agents.

Independent Insurance Agent

An independent insurance agent works with many insurance companies to sell products. This enables the agent to offer the best possible deal to clients, making it easier to attract new clients. Independent insurance agents work on commission and enjoy higher commissions than captive agents.

Benefits of Being a Captive Insurance Agent

Salary, commission, financial assistance. Overall, the most significant benefit of being a captive insurance agent is the stability of working with only one insurance agency. The salary, financial help with marketing and hiring, and the benefits that many captive agents enjoy can make a difference. This stands out from the experience of being an independent insurance agent who must have funds to start their agency and start selling insurance products.

Disadvantages of Being a Captive Insurance Agent

Challenges with meeting the needs of the client. That said, meeting the customer’s needs and selling products to clients for a reasonable rate can be tricky if you're a captive agent. Dedicated agents have limited product options to choose from when they're trying to meet the needs of their clients.

For clients seeking specialized forms of insurance, the captive agent may not find the right kind of insurance. If they can't, they will either have to turn the client away or sell the client a type of insurance that doesn't fully meet their needs. For some insurance agents, this can create unhappiness because their ultimate obligation is not to the client but to the insurance agency for which they work.

Production requirements. Dedicated agents may be required to meet a certain quota or not meet their full earnings potential. Similar to the problem listed above, this can lead some agents to push products on clients that might not be in their best interests.

Limited ability to help customers who don't qualify. When the dedicated insurance agency changes its policies or pricing structures, some customers may no longer qualify for insurance. Whereas independent agents can simply shop around for a better policy, the dedicated agent cannot. This could impact their ability to retain customers and meet clients’ needs.

No control over succession. While an independent agent can pass along their customers to an agent taking over their business, captive agents do not have ownership over their book of business. Upon retirement, they have little or no control over the fate of their clients.

Captive or Independent? Which Would You Choose?

While there certainly are advantages to being a captive insurance agent, being an independent agent gives you more control over the fate of your business and over the products that you sell to your customers. Ultimately, it's easier to be a better insurance agent if you're working independently - provided that you have the right partnerships and relationships with insurance agencies.

If you're an independent agent, joining the right cluster is essential. Join an insurance cluster that will give you access to many carriers. You don't have to rely on the salary of a big agency if you have access to competitive commission structures, profit sharing, and more. That's why many insurance agencies join Voldico. Contact Voldico today to learn more.