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Differences Between Captive vs. Independent Agents?

Captive Agent vs. Independent AgentCaptive Agent vs. Independent Agent
min read
August 21, 2023

As a current (or future) insurance agent, you want to set yourself up to do your very best work. And as you figure out how you can reach your potential, one question you might be tossing around?

Should I be a captive agent or an independent agent?

Both come with significant benefits—and pitfalls—depending on how you prefer to work, the types of insurance products you can sell, and how you earn your income.

Let's dive into the differences between the two so you can make the best decision for you, and your career.

Captive vs. Independent Agents 101

Captive insurance agents work for a single insurance company, while independent agents sell policies from multiple carriers. 

They both sell policies to small business owners to help protect them against specific risks (like fire, theft, or data breaches). 

While they do many of the same tasks, the main difference between the two is the type of commercial policies available to them and the service they will ultimately be able to provide their clients.

Considering being one or the other? Let's dig into both so you can make the best decision for your career.

Captive Agents

Captive insurance agents, or exclusive insurance agents, work for one company in the insurance space. As such, they sell that carrier's policies exclusively. This can make it simpler and easier to sell all the insurance coverage a client needs by bundling policies together and securing multi-policy discounts and other benefits.

While captive agents generally only sell their own carrier's policies (like only selling policies from All State or State Farm), there are some exceptions. As a captive agent, you might sometimes sell a competitor's policies if your parent company doesn't offer that kind of insurance coverage. For example, a captive agent representing ABC Insurance might sell a cyber liability policy from XYZ Insurance if ABC doesn't provide cyber insurance.

Some captive agents are paid a salary. Others are independent contractors who rely entirely on commissions earned for each sale. In some cases, captive agents earn both a salary and commission. However, if you earn commissions, your commission rates are typically less than those earned by independent agents because the insurance company pays for overhead costs, such as office space, staff salary, and leads.

How Much Do Captive Agents Earn?

As with any career, the compensation you'll earn as a captive agent will depend on a variety of factors—including your employer, location, the types of insurance you sell, and other specifics. 

But the average captive agent salary in January 2023 was $93,821, which includes a base salary of $66,247 and additional pay (bonuses and commissions) of $27,574.

Independent Agents

Independent insurance agents don't work for a single company in the insurance space. Instead, you operate your own business or work as part of an agency in which you represent different insurance companies. This allows you to offer a variety of business insurance policies from different carriers.

Many insurance agents opt for the independent model. In fact, independent agents were responsible for nearly 88% of all business insurance policies written in 2021.

One of the benefits of being an independent agent? Because you're not obligated to sell any one company's insurance products, you can operate as an advocate on your client's behalf by shopping around and identifying the best policy available from the different carriers you represent.

Independent agents aren't paid a salary by the companies they represent. Instead, insurance carriers pay a commission for each policy an independent agent sells. Because independent agents are responsible for their own overhead, insurance carriers will typically pay you a higher commission rate than they do captive agents.

How Much Do Independent Agents Earn?

Independent agents often earn higher salaries than their captive counterparts, but there's a catch: an independent agent is typically responsible for covering their own business expenses—like rent or office space, office supplies, advertising and marketing, and employee salaries.

On average, an independent agent's salary is $117,895, split between a base pay of $80,715 and bonuses and commissions of $37,181.

What Are Insurance Brokers?

When it comes to buying an insurance policy, customers have an additional option—and that's working with an insurance broker.

In contrast to insurance agents, insurance brokers represent customers—not the insurance provider. Their primary responsibility is to navigate the insurance industry and shop around for a policy that suits their client's needs, both in terms of coverage and budget.

Though brokers and independent agents seem similar, brokers can't execute or bind a policy—only agents can put a policy into force on behalf of the company they represent. But because brokers aren't contracted to any specific insurers, they can often compare and recommend a wider variety of insurance products than independent agents.

Companies in the insurance space pay brokers a commission when a customer buys a policy a broker recommends. However, brokers can't suggest policies to customers based on the commission they'll earn as they have a fiduciary duty to their clients, though they can charge a broker fee for their services—which can include ongoing advice about a customer's insurance situation.

Working with an insurance broker is especially beneficial if a customer has complex insurance needs or their business is growing and needs additional protection.

Pros and Cons of Being a Captive Insurance Agent

There are some significant benefits to becoming a captive insurance agent. In exchange for representing a single company, you're not responsible for dealing with the intricacies of running your own business. On the flip side, agreeing to sell a single insurer's products can limit your potential clientele and earnings.

Let's look at the advantages and disadvantages of working as a captive insurance agent.



Pros and Cons of Being an Independent Insurance Agent

Becoming an independent insurance agent can give you more freedom to recommend and sell a broader range of insurance products. This can help you appeal to a wider target market, but there are still some considerations to keep in mind before you go independent.

Let's look at the benefits and downsides of working as an independent agent.

Independent Agent Pros

Independent Agent Cons

Which Career Path Is Right for You?

There's no right or wrong choice when it comes to deciding between a captive agent vs. independent agent. What matters most is becoming the type of insurance agent that appeals to you, your preferences, your goals, and your expectations.

Fortunately, as a licensed insurance agent, it's not too difficult to switch from being a captive agent to an independent agent—or vice versa. In fact, sometimes new agents start their careers as captive agents to learn the ropes and establish themselves in their market before transitioning to an independent agency—or going out on their own.

Some considerations you'll want to think about when deciding between becoming a captive agent vs. independent agent include:

Use These Tips to Help You Decide What Type of Insurance Agent to Become

Many small businesses struggle to understand the complexities of business insurance. As an insurance agent, it's your responsibility to demystify insurance to help business owners protect their companies and employees.

Ultimately, choosing between becoming a captive agent vs. independent agent has less to do with the job responsibilities and more to do with the work environment you prefer. If you like having a lot of different options and responsibilities–an independent path might be for you. If you enjoy structure and security, then becoming a captive agent may be the right choice.

Either way, you're in for a fulfilling career!

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