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Insurance: Independent Agents vs. Captive Agents

Insurance: Independent Agents vs. Captive Agents

When shopping around for insurance, many people do not understand the options that they have, let alone all of the regulations and nuances that exist. Insurance Agents are there to help explain how your insurance coverage works and recommend plans that fit your budget and your lifestyle. If someone is shopping around with only budget in mind, they tend to purchase insurance policies based on the minimum requirements of the law, this is dangerous. Insurance is an investment in yourself and not just another bogus thing that you will probably never use, that's why everyone needs to understand what motivates an insurance agent and if they have your best interests in mind.

There are two different types of Insurance Agents: Independent Agents and Captive Agents. This article briefly describes the differences and similarities between the two, you can decide which agent best fits your interests.

Captive Agents (Direct Writers)

The captive agent (direct writer) carries very familiar names as you see on most commercials Farm Bureau, Allstate, State Farm, etc. We will simply refer to them all as the captives. The reason why they are "captives" is because they purchase a franchise with one of these companies, they will use the captive company's systems and they can only sell certain captive products. If you call a captive agent for a home insurance quote; you will get a single quote and a single price from that company. Captives agents can only sell products with the company they are bound to and it does not matter how competitive the price is, they will only offer one. This can be very disadvantageous because if the captive company does not want a "certain" type of client, they will often decide to not write your insurance, cancel you, or non-renew you leaving a client to scramble for insurance elsewhere.

There are many advantages to being with a captive agent too, don't get me wrong. The captive agent has much more simplicity meaning they can get quotes done much faster given they have only one company to search with. They also have WAY more advertising given the scale they have across the entire nation which is why everyone knows their brand. With the enormous market power of the franchise companies, people often get the misconception that the insurance market is small or that these companies have the cheapest rates simply because they claim to over commercials. More often than not, these companies have higher costs which leads to higher prices; this is why smaller companies that sell insurance regionally compete very well, although they lack that name brand and marketing.

Independent Agents (Brokers)

An independent insurance agency is a privately-owned business, this means that the companies do not have any direct control/affiliation with the agency. Since independent agencies are privately owned and foster a variety of companies, we often refer to independent agents as “brokers”. This creates a much different relationship a client has with their independent agent compared to a captive agent. With the independent agent having this setup, it creates a relationship where the agent represents the client to the carrier, captive agents work the opposite way. Independent agents can be very small or very large and typically belong to organizations such as Trusted Choice or state specific groups such as the MAIA (Michigan Association of Insurance Agents).

One of the disadvantages of being an independent agent is that they tend to be smaller businesses with restricted resources, often trying to master the complexities of every company they represent. Fortunately, this is also an advantage. When the companies that captive agents represent (E.g. State Farm, Farm Bureau, Allstate) raise insurance prices, the client (you) have very limited options: either deal with the price increase or switch to another agent and company. With Independent Agents, you can shop around with different companies while maintaining the same agent. This means they already have your information which saves clients time and hassle.


Aaron Cope is the Sales Manager at Great Michigan Insurance. Aaron enjoys rock climbing and the occasional micro-brew.


Please check out my other article, "Don't settle for Mediocre".

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