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.

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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.

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2 responses to “What Is the Difference between Captive and Independent Insurance Agents?”

  1. Frederick Bradley says:

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  2. America's Professor - DCM says:

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