There are three types of carriers and it’s important to know the difference:
- Independent Agent: An agent that has multiple contracts with several carriers rather than a single company. They have an agency where you can meet them in person. They receive a commission based on a percentage of the policy, so it does not cost the client anything additional to use an independent agent. It is a free service for the client.
- Captive Agent: An agent who has only one contract with one carrier, most often with a non-compete clause. They have a store front.
- Direct Agent: An agent who works directly for the carrier in a call center. You never meet them in person and it’s likely you won’t even work with the same representative twice.
Having an independent agent means you have an advocate on your side that works for you, not a big corporation. If you ever have a claim or insurance issue, you’ll have peace of mind knowing you have an agent that can walk you through the process. If you don’t like call centers, then you definitely want an independent agent that can give you service you expect from a small business. You’ll still have access to the carrier, but you also have your agent you’ve built a relationship with to look out for you, that knows you.
Since independent agents are not captive, they can shop around for you, finding you the best rates for your insurance needs. You can switch carriers as your insurance needs and/or rates change, but you can keep the same agent that has built a relationship with you. As an independent agent I use an advanced rating system that allows me to quote numerous A rated and above carriers at once to help me find the best rates for my clients. Should they ever want to be reshopped again, all I have to do is push a button; they will never have to be overwhelmed with shopping for insurance. A captive or direct agent can only give you quotes for one carrier. As an independent agent, I can switch clients to another carrier for a better rate, but they still have me as their agent, making the switch much easier and painless!
Captive agents are in a contract with one carrier that prevents them from working with other carriers. There is usually a non-compete contract as well, so depending on their state laws, even if they leave that carrier, they will have to wait sometimes years before being able to write business for their clients again. Unfortunately, this means in many cases a captive agent has to keep their carrier happy so that they don’t lose their entire book of business, this can get in the way of trying to advocate for their clients. For an independent agent, if a carrier is not treating clients fairly, they can let clients know and switch them to another carrier. They are not stuck in a non-compete with one carrier. This also means that many times it’s in the carrier’s best interest to keep the independent agent and their clients happy because they don’t want to lose the independent agent’s business.
Another benefit to having an independent agent is that you can ask your independent agent about possible claims without worrying about it ending up on your insurance report. Just the other day I had a new client that was shocked to find out there were two claims on his insurance report. Both were zero pay outs, but because he called and asked his previous direct agent about a possible claim. One was when his HVAC system stopped working and he wondered if that was covered by home owner’s insurance, it’s not but now he has that as a claim on his insurance report. This scenario happens all the time, I constantly run quotes for people shocked to find out they have claims on their reports simply because they asked a question.
Here is a list of some captive and direct carriers that do not work with independent agents:
- Allstate (they do have a product for independent agents called Encompass)
- Amica (call center only)
- Esurance (owned by Allstate)
- Farm Bureau
- Farmers (they do have a product for independent agents called Foremost)
- Geico (call center only)
- Liberty Mutual (they do have a product for independent agents called Safeco)
- Nationwide (they do have a product for independent agents called Allied)
- State Farm
- USAA (call center only)
- Benefits of Independent Insurance Agents (webtecinsurance.wordpress.com)
- Consumer info: Why choose an independent insurance agent?
- Safeco’s Benefits of an Independent Agent
- All Agents Are Not Created Equally