Independent Insurance Agent Vs Captive Insurance Agents

All fellow Insurance Agents and potential agents! These insights might be useful for those who are already in Insurance Sales and are looking to make a successful career as an Insurance Agent. This information will help you choose the type of contract, independent or captive, that best suits your goals and needs at this stage in your career.

28 years ago, when I began my career in insurance sales, a company only offered Captive Sales Contracts. I didn’t know about Independent Contracts. My first nine years of my career were spent selling, recruiting, and training agents under a captive contract. The last 18 years have been spent selling, recruiting and training agents under Independent Sales Contracts.

Unsufficient product selection was one of my biggest concerns while working under a captive agreement with one company. There were times when the products we offered weren’t competitive in the market.

This severely restricted our ability to offer solutions to potential customers. Over the years, I’ve found that captive companies typically only offer two to three products. They are usually focused on a few niche markets. You can’t pick up any other contracts, which limits cross-selling opportunities. Independent agents can contract with multiple companies. This can lead to confusion for many agents who contract with too many companies at once. You may need to switch markets or add a company with a highly competitive product at times. To do this, you will need to become an independent agent.

Another concern that I had when I was working under a Captive Contract, was that I didn’t own my block. A second way to describe ownership of your block is “having vesting right on your block” My employer required that you be their 15-year-old employee before you could have 100% vesting rights on the block of your business.

After 9 years, I had only 40% of my vested rights when I left. This means that I didn’t receive 60% of my renewals for my in-force policies after I quit and became an independent agent. I was not informed, and I didn’t know it. There are other ways to sell Insurance. You get 100% vesting rights on all sales. It was hard. It was also why it took me so long to convince myself to move. I knew that I would lose a large portion of my renewal income. Many agents work for Independent Agencies, which sell multiple companies and don’t grant vesting rights. The Agency retains all renewals even if the agent leaves. This could not be a bad thing depending on what other support and services the Agency offers the Agent.

You will also notice that Independent Agents’ commission schedules are generally higher than Captive Insurance Agents. As a Captive Agent, I was paid 20% commission on my Health Insurance products and 55% to 65% commission on our Life Insurance products. I began earning 25% commission on all my Health Insurance Sales, and 90-100% on my Life Insurance Sales when I switched to Independent Agent Contracts.

Captive Companies offered support and training for new agents. This was a major advantage. There are many MGA, NMO and IMO Agencies that provide all the support and training that traditional Captive Companies do not offer. You still have top commission contracts, immediate vesting rights, multiple company portfolios and lead support systems.

We hope you found this information useful. You don’t have to learn things the hard way like I did early in my career. It cost me a lot of money and time not to have first-hand knowledge about the pros and cons between Independent vs Captive Contracts. A career in insurance sales can be rewarding. Your journey to success will be easier if you start from a place of knowledge.