An independent insurance agent is a person who works with many insurers and often sells different types of insurance products. Independent agents are well-positioned to shop the market to find prices and policies that best meet your needs. That’s different from a captive or exclusive insurance agent, who typically works for and only sells policies from one particular company.
This embedded content is not available in your region.
“Independent agents place approximately 62% of all U.S. property/casualty premiums, dominating commercial lines with 87% of premiums written,” said Mark Friedlander, a spokesperson for the Insurance Information Institute. “Captive agents and direct writers hold 35% and 25%, respectively, in personal lines premiums written.”
The use of independent agents has evolved as insurance companies branched out of their home areas and needed local experts.
Learn more: How does car insurance work? The basics explained.
Independent and captive agents are both trained to connect customers with insurance policies that meet their needs. But no matter what type of insurance agent you choose to work with, they need to be licensed in the state where you live because each state has different requirements. There is no national insurance licensing system.
Captive agents and independent agents are equally qualified and licensed to sell a variety of insurance products, which could include homeowners, auto, life, health, and disability insurance, said Friedlander. “Regardless of whether an agent is captive or independent, good agents are well qualified to represent the carriers they work for,” he added.
Learn more: The most common type of car insurance explained
Dealing with an independent insurance agent can make it easier for you to compare policies from different companies all in one place.
Independent agencies are often small businesses with a few agents and other staff who live in the communities they serve. The number of companies an independent agent works with can vary.
Nationwide and Progressive, for example, work mostly with independent agents.
“A smaller independent agency with one location may only represent a handful of carriers while a larger agency that operates in multiple states could represent 20 or more insurers,” Friedlander explained. “Most regional insurers are typically represented by independent agents because it is more cost-efficient than hiring their own exclusive agents.”
Captive insurance agents may be employees or contractors of the company they represent. You might see the term “dedicated” agent.
Companies like State Farm, Allstate, and GEICO usually use captive agents.
Some insurance companies have both types of agents working with them, like Farmers.
Captive and independent agents represent the insurance companies they work with and earn commissions for every policy they sell. Often, captive agents also earn a salary and benefits from the insurer they work for.
Neither type of agent chooses the prices for the policies, so don’t expect to negotiate a price. Insurance companies set the rates, and agents have no leeway, although they can suggest ways to reduce the price of a policy by changing coverage or looking for car insurance discounts. Both types of agents can bind policies, meaning they can provide proof of coverage before the policy takes effect.
Friedlander noted that “independent agents are required to sign the Trusted Choice Code of Ethics that emphasizes honesty, integrity, competence, and diligence with a focus on acting in the client’s best interests and maintaining confidentiality. Captive agents sign a similar ethics pledge with their carrier.”
Friedlander said all agents must also abide by regulatory ethics codes in the states where they operate and could be sanctioned for violations.
An obvious difference between independent and captive insurance agents is the range of policies they can offer for sale. A captive agent is typically limited to only what one company offers.
However, a captive agent might have deeper knowledge of the products they sell.
Since independent agents sometimes work with smaller insurance companies, people who have had problems getting insurance because of a bad driving record or a low credit score might do better with an independent agent because of the variety of companies the agent represents.
Learn more: What is high-risk car insurance and who needs it?
Another difference is in the commissions they earn. While both types of agents earn commissions, the commission for an independent agent is usually higher.
According to Insurance Business, an insurance sector publication, here’s how much agents selling auto insurance can earn:
-
Independent agents. Independent agents earn about 15% for new policies and between 2% and 5% for renewals.
-
Captive agents. The commission rate for captive agents is between 5% and 10% of the total premiums for a new policy and between 2% and 5% for a renewal.
Yes, independent insurance agents can bundle policies from the same company, which usually means a discount. This is important because an auto and home insurance bundling discount is often one of the higher discounts you can snag.
If you’re buying multiple policies, such as auto and home insurance, a benefit of an independent agent is their ability to compare prices for bundled vs. separate policies. For example, is it cheaper to have an auto insurance policy from company A and homeowners insurance from company B or to bundle them with one insurer? An independent agent working with multiple companies can figure that out for you.
Learn more: How an auto and renters insurance bundle can save you big
One benefit of working with an independent agent could be that you would not have to switch agents if you choose to change insurance companies later on.
No matter who sells you the policy, making a claim is generally the same.
“Most property/casualty claims are filed directly with insurers via mobile apps, an online portal, or on the phone. A few independent agent carriers require customers to file their claims through their agent,” said Friedlander.
You might not need an agent at all to buy insurance. Many companies sell policies directly to consumers online.
Amy Danise and Tim Manni edited this article.