Captive Vs. Independent Agents: What’s The Difference?

If you’re thinking about selling insurance, you’ve probably heard the phrase, “captive insurance agent” or “independent agent” and wondered what it means. 

In this article, I will talk about the differences between an independent and a captive agency. I’ll detail the pros and cons of each while offering some advice to help you decide which option is best for you. 

Let’s get started. 

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What is a captive agent?

Don't be a captive final expense agent.

The clue here is in the title. If you describe something as “captive,” then it’s highly likely that the role lacks independence or freedom.

As a captive agent, you work under ONE agency. You cannot do business with any other organization.

Occasionally, you can sell other products. However, for the most part, you work solely for that agency. 

Are there any advantages of working with a captive agency? Yes! But, first of all, let’s explain what it means to be a captive agent. 

How Being Captive Works

In a captive agency, there is a focus on either one product or one market.

For instance, if you work for a property and casualty captive firm, it’s highly likely that your only product will be car insurance or homeowner’s insurance. 

This simplifies the learning process. You don’t have to spread yourself thin trying to figure out which company offers this or what company does that… and so on.

It keeps the process easy, which is especially useful for new agents. And in my opinion, there’s generally more camaraderie and teamwork in a captive organization. 

In most firms (not all), agents get together and share their successes of the week.

Plus, there’s usually some hands-on training involving the whole team, providing you with an opportunity to create strong relationships with your colleagues and build rapport.

There’s a chance you’ll get to join events and seminars. However, just remember this might not be true for all captive firms. 

So what are the drawbacks of working at a captive agency?

Well, there are several that I think are well worth considering. First of all, there are many contracting hang-ups that, for me, create a “make or break” type situation. 

For example, as a captive agent, you’re NOT investing your time or expertise into your own business. You’re an employee.

And as such, your hard work and effort improves your employer’s business. You might spend years building a book of business all for the captive agency. And, for what? 

If you decide to quit or worse, your contract gets terminated, you’ll likely discover a ton of restrictions that prevent you from contacting previous clients.

Plus, chances are you won’t receive anything like renewal income. 

Moreover, if a captive agency offers multiple carriers to contract with, they generally will not release. 

If you don’t know what a “release” is, it’s pretty important to understand. A release means you can move your carriers from one agency to another. This is beneficial if you decide your relationship with your first agency isn’t working out. 

However, captive agencies are more restrictive when it comes to switching agencies.

You might find that your favorite carries are stuck with that captive agency for at least six months before you’re allowed to move them over.

Essentially, they want you married to their firm and, in most cases, will make leaving difficult. 

How Being An Independent Agent Works

Now, let’s move on and discuss what it means to be an independent agent.

First things first, full disclosure, I’m an independent agent and always have been.

I think there are some definite advantages to being an independent agent and some disadvantages. But, I’ll explain more a little bit later.  

I would like to mention that an independent agent is more like a business owner. It’s best to think about the agent as an individual, not a company.

Generally, independent agents have the best access to multiple lead vendors, insurance carriers, and commissions.

This allows you to create a business model that’s more flexible and potentially more lucrative.

Benefits Of Independence

So, let me give you a couple of examples. I operate in the final expense world as an agent. And, in my practice, I represent half a dozen to a dozen different carriers (as opposed to a captive agent who only represents one company).

Now, this part is crucial. When you represent multiple carriers, you have a far better chance of providing your client with the best possible deal in terms of cover and price. 

Most of the time, I beat the competition, and there’s far less chance that another agent will be able to best my deal three to six months down the line. 

On top of that, I can usually make more money per sale because I carry the cost of training myself and the cost of leads, and the responsibility of finding those leads.

Why Aren’t All Agents Independent?

So, why doesn’t everybody become an independent agent? Well, in all honesty, it’s because there are some definite drawbacks. 

First, you’re responsible for your lead generation. Many independent agencies may suggest some lead options, but you have to pay for them. 

In my agency, for example, I offer my agents multiple lead options. They then pick the option that best suits their budget.

But it’s their responsibility, not mine. Honestly, being an independent agent is like being a lone wolf. 

In some ways, you’re on your own. You have to reach out when you need help. You won’t get the same level of “babysitting” that you would at a captive agency.

An assertive, confident, entrepreneurial type person will, in my opinion, thrive. However, not everyone can manage this level of independence.

Some agents complain that there’s not enough support. It’s more of a throw yourself to the wolves’ style training, where you learn on the go. 

I disagree with this. I do not operate my national agency this way. No matter where I recruit an agent from, they have access to me personally for support and advice.

And they certainly have access to tons of training online such as daily group training calls (which they can plug into) and training videos on a variety of topics. 

So, do independent agencies offer guidance? 

Yes and no. The truth is probably somewhere in between. Training is going to vary depending on the agency. It’s up to you to find out which independent agencies offer the best resources and training.

There’s one pro that I forget to mention that relates to agencies. The best independent agencies will vest you 100% from day one.

This means you have complete ownership of your book of business. And even if you leave that particular firm, you’ll continue to get paid all the same.

You’ll also want to make sure you’re paid directly from the insurance carrier – not the agency. It’s a much safer bet. And one less middle man to worry about. 

Plus, many independent agencies nowadays will release. I’ve worked with a lot of agencies that have released their agents to me, and likewise, I’ve released my agents who wanted to move on to other agencies as well.

You’ll find, for the most part, a positive culture in the independent agency world.

Should I Start As A Captive Or Independent Agent?

Ultimately you need to decide what’s best for you. There are a lot of options to choose from. In fact, there’s probably too many.

Too much choice can be confusing. And that’s not a great frame of mind to be in if you’re trying to make a difficult career decision.

Here’s My Advice

If you’re new to the industry and happy to be an employee under the control of a company, I would suggest a captive agency. I would also recommend working for a captive agency if you meet any of the following criteria:

  • If you’ve got ZERO experience in straight commission sales.
  • If you’ve never run a business.
  • If you’ve never had to manage your own time and workflow in any capacity.
  • If you’ve never worked independently before. 

Of course, you’re welcome to make your own decision on the matter. But you might find an independent agency very alien if you’re used to being a part of a team. 

Alternatively, a captive agency will feel like you work for someone else. You’re going to have a manager. And like most office-type work environments, they’ll be certain expectations that you have to meet.

In short, a captive agency will be similar to a traditional office setting where you have to balance your work with training events, team meetings, colleague relations, and more. 

If you immediately recoil at the thought of this, then chances are an independent agency will be the better choice for you.

Just remember, don’t opt for an independent agency just because you want more freedom. More independence also means more responsibility (more than most people are used to).

Why I Love Being An Independent Agent

To be honest, I feel like I’ve taken this freedom for granted. I’ve only had a “real” job for less than half a year. And I’m 36!

For 14 years, I’ve been an entrepreneur on some level. So I don’t know what it’s like to work under someone, to be just another employee at a big firm.

I’m used to being an independent business owner. Every morning I wake up knowing that if I don’t make enough sales, that’s my responsibility to bear. And that’s okay for me. 

However, not everyone can deal with that pressure. Not everyone can stay motivated without a team of colleagues encouraging you along the way.

An independent agency assumes that you’ll get up and go to work by yourself – no manager or supervisor needed. 

Plus, it’s up to you to continuously invest in leads, even if your budget is tight, and you start to doubt how good your leads are.

You can’t make excuses when things don’t work out. In an independent working environment, you need to be assertive, self-motivated, and have a strong entrepreneurial attitude. 

And personally, I think confident, business-minded individuals will thrive in an independent agency. But of course, I’m biased because I think this route is a more lucrative opportunity. 

I also believe that it solicits the most freedom. Why work hard improving someone else’s business when you could work for yourself?

If you decide to quit a captive agency, they benefit from your hard work while, in most cases, you’re left at a disadvantage.

If given a choice to invest time, effort, and money into myself or someone else’s company, I would choose myself.

As an independent agent, I have more control over how I live and organize my work. The only downside is that it comes fraught with difficulties that might be hard for some people to understand. 

That’s why, to some degree, I think the industry needs both captive and independent agencies.

I used to scoff at the captive world. I thought it was a joke early on in my career.

But, then I realized through training my agents (1000 plus now) that some people are better suited to a structured office environment. And that’s okay.

At least they can feel secure in a captive agency rather than struggle mercilessly as an independent agent.

So give this issue some thought before making up your mind. If you have any questions, feel free to leave a comment below.

I reply to every comment and would love to hear your thoughts on the matter. You can also send me a message here.

Thank you guys so much for reading, and I hope you found this article useful.

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