What Is the Difference between Captive and Independent Insurance Agents?

 

Most people differentiate insurance agents by the kind of insurance they specialize in – health insurance agent, auto insurance agent, life insurance agent, and so on. In the insurance industry, however, there is another important way that insurance agents can be classified: captive insurance agents vs. independent insurance agents. Whether you are a captive insurance agent or an independent insurance agent can have a profound effect on your daily routine, the kind of insurance you sell, and your income potential within the industry.

Insurance agent resources

What Is a Captive Insurance Agent?

Captive insurance agents, otherwise known as exclusive insurance agents, are contracted to work for a single insurance company and sell only that insurance company’s policies. In return for captive agents agreeing to sell only their policies, insurance companies generally provide their exclusive agents with a fair amount of support, which can include setting them up with an office or other workspace, and giving them access to an administrative staff to process paperwork. When consumers contact an insurance company about purchasing a policy, they will generally refer them to a captive agent that works in their area.

What Is an Independent Insurance Agent?

Unlike captive insurance agents, independent insurance agents are not contracted to work with one single company, and they can sell policies from multiple insurance companies. Instead, independent insurance agents contract with multiple insurance companies, selling specific lines of insurance coverage from those companies on a non-exclusive basis.

While independent agents do not have access to the support and referrals that insurance companies provide to their exclusive agents, independent insurance agents have the benefit of being able to offer their clients policies from multiple insurance providers, giving them the ability to offer a wider selection of coverage options. On the downside, independent insurance agents are generally not allowed to sell policies offered by the companies which rely on captive agents, which often sell their policies through their own agents exclusively.

Independent vs. Captive

The biggest difference between captive and independent insurance agents is in compensation. Typically, independent insurance agents take home a higher percentage of the sales they make, sometimes earning commissions as much as 50% higher than their exclusive agent counterparts. That said, independent insurance agents are also responsible for paying for all their own overhead, meaning that much of their earnings is spent maintaining their independent business operation.

For captive insurance agents, lower commission rates are a tradeoff made in return for the insurance companies they are contracted with paying a significant portion of their overhead, as well as often paying them a salary in addition to commissions earned from sales. While independent insurance agents have a theoretically higher earnings ceiling than captive agents, the stability provided by working directly for an insurance company means that a captive insurance agent’s income is likely to be more stable and consistent. To offset the costs of operating independently, many independent agents partner with other agents to form agencies, with each member agent contributing to the cost of operations.

Want to learn more about the insurance industry? America’s Professor offers online insurance license exam prep classes taught by experienced industry professionals. Learn more by calling 800-870-3130 today.

video courses online sample questions
PRE-LICENSE COURSES SAMPLE QUESTIONS
17 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Frederick Bradley
Frederick Bradley
5 years ago

I would truly would like to obtain my property and casualty license and this seems to be to be a great program.

America's Professor - DCM
America's Professor - DCM
5 years ago

Hello Frederick, We will be in contact with you soon. Thanks for your interest in our program.

Ashley Johnson
1 year ago

I liked that you said that one thing to consider when you are need of new insurance is to get in contact with a professional independent insurance agent since they can offer you options of insurance from several different insurance companies. I have been thinking about getting new insurance but I have been worried that I won’t find a policy that will meet my needs. I will be sure to use the help of an independent insurance agent so that I can achieve several different options from different companies that would benefit me.

Alicia Byrne
10 months ago

Thank you for pointing out the difference between an independent agent and captive insurance agents. My thoughts would be that as long as the insurance policy is good for you and the insurance agent works well with you then it is enough. My daughter is going to buy insurance for her car and I would imagine her needing the help of an insurance agent soon.

T. Jones
T. Jones
9 months ago

I currently work for a brokerage company and I contract through several life insurance companies. However, I find that a large number of my clients are looking for auto insurance as well. Can I sign up for another brokerage company that partner with auto insurance companies while staying with my current brokerage company?

America's Professor - DCM
America's Professor - DCM
8 months ago
Reply to  T. Jones

Hi T, The only thing that might limit you is your employment contract. If your currently brokerage company doesn’t have a problem with it, there shouldn’t be an issue with you being appointed by another one. Good luck!

Andrew Greeley
Andrew Greeley
7 months ago

A brokerage posted a job listing looking for insurance agents in a independent brokerage; they don’t pay for any of the course unlike some captive brokerages do. The employer said captive brokerages are worse because they own your license, so if you ever leave, you don’t get to keep your insurance license.

Is this true?

America's Professor - DCM
America's Professor - DCM
6 months ago
Reply to  Andrew Greeley

Hi Andrew, If you get your resident license, you take it with you wherever you go. You would only have to be appointed by a different company to sell their products if you move. I’d highly recommend going with a company that has a good training program. Check out insurance-forums.com and see if they have anything to help you. Good luck!

Xavian J Tate
Xavian J Tate
2 months ago

If someone gets their insurance license through a specific insurance agency during an internship can they still use the license elsewhere since it was an internship?

America's Professor - DCM
America's Professor - DCM
2 months ago
Reply to  Xavian J Tate

Hi Xavian, If you got a full Agent/Producer license (not subagent) you take that license with you. If you have an employment contract that would be different but no, the license goes with you. Good luck!

Xavian J Tate
Xavian J Tate
2 months ago

THANK YOU

Alison N Ball
Alison N Ball
1 month ago
Reply to  Xavian J Tate

Most would take the cost of licensing out of your final paycheck unless you’ve been with them for many years after you get it. It’s typically outlined in the employment contract with the majority of captive agencies. Likewise, if your agent pays for your renewal many will take the fees out of your final paycheck. You still get to keep and use it after you leave though. Just make sure you know details regarding any type of “Do not compete” agreements if applicable that were signed when you started employment.

Alyce Tyler
Alyce Tyler
1 month ago

Hello, I would like to take the course to become a licensed Health, Medicare and Life insurance agent. Please advise. Thanks

America's Professor - DCM
America's Professor - DCM
1 month ago
Reply to  Alyce Tyler

Hi Alyce, You would need a Life and Health license for your state. What is your resident state?