Captive Agent (Insurance) – Explained – The Business Professor, LLC

A licensed insurance agent who works exclusively for a single insurance company is known as a captive agent. A captive agent represents a single insurance company and sells only the products offered by that company. A captive agent can be a full-time employee of the company or an independent contractor. Full-time employees receive a fixed salary plus commission, while independent contractors earn commission. Captive agents have in-depth knowledge of all of their own company’s offerings, but they can’t serve those who don’t need or qualify for the company’s products.

what does a captive agent do?

Many large and well-known insurance companies employ captive agents who sell their insurance policies exclusively. Across the country, State Farm, Allstate and many other companies have their captive agents. Captive agents are experts in your company’s policy with detailed knowledge. they do not have to learn about the rules and products of the different insurance policies offered by the different companies. they can easily suggest the products offered by your company according to your need. they can easily calculate the price of coverage after knowing some details. Common insurance products include auto, home, mobile, rental home, motorcycle, boat, commercial, and health. life annuities, investment funds, retirement plans, business life, etc. are some of the common financial products.

Reading: What is a captive insurance agency

captive agents and independent agents

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There are mainly two types of licensed agents who work for insurance companies; captive agents and independent agents. Captive agents enter into an agreement with a single insurance company to sell only their products. while independent agents can sell policies offered by multiple insurance agencies. have a contract with more than one insurance company and sell specific lines of insurance policies offered by those companies. Captive agents enjoy certain benefits against the contract that include a fixed salary, office space to work, and direct access to company administration for quick paperwork. When a client approaches the company for a policy, the insurance company usually refers them to their captive agents who work in that area. on the other hand, independent agents do not get such endorsements and referrals from the insurance company. they have to work from their own office and rely on commission to earn. however, they can offer their clients a wide range of policies offered by different insurance companies to choose from. Your customers can pick the most suitable one as per their need and eligibility. But, in general, independent agents do not have the opportunity to sell the policies offered by companies that have their own captive agents. those companies often rely exclusively on their own agents to sell their products. In general, independent insurance agents earn a much higher percentage of sales and their commission rate is typically 50% higher than captive agents. but at the same time, they need to run their own business without any support from the company. The commission rate is usually much lower for captive agents, but apart from the commission, they get other supports such as monthly salary, operating expenses, etc. Captive broker earnings are generally more consistent and stable than independent broker earnings. Independent agents often partner with other independent agents to form an agency and jointly run their operations.

advantages of operating as a captive agent

Captive agents need to learn and memorize the rules, products and guidelines of a single company. they do not have to gather knowledge about the different policies that various agencies offer. insurance companies usually provide support to set up captive agencies. They offer training and all other required supports to their agencies and captive agents, captive agents are not required to advertise their products and offerings. the insurance company assumes all marketing and advertising responsibilities. Usually, captive agents sell the products of some nationally recognized brands, so agents don’t have to worry about advertising and promotion. Captive agents typically earn a monthly salary and other benefits from the company in addition to the sales commission, so they have more consistent earnings. captive agents have direct access to the company’s administration, so they can carry out paper procedures more efficiently and quickly.

disadvantages of operating as a captive agent

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Captive agents only have one product to sell. they cannot offer different options to their customers. Even when they know that the product is not the best fit for their customer, they need to convince the customer to purchase that insurance plan. If the company stops offering a certain line of insurance, that company’s captive agent must stop offering that policy. captive agents often need to push certain policies that are not in the best interest of their clients. The captive agent’s responsibility is to promote and sell the products of its parent company and build a business for it. when the agent wants to withdraw from the job, he is not free to perpetuate the agency to whomever he wants.

related topics

See also: What Is Private Health Insurance?

  • what is insurance?
  • captive agent
  • independent agent
  • captive insurance company
  • subscriber
  • combined ratio
  • claims adjuster
  • capital at risk
  • assigned risk
  • contingency
  • incurred but not reported
  • actuary
  • qualified actuary
  • cession (reinsurance)
  • burning cost ratio
  • what is an insurance contract?
  • accidental means
  • anti-stacking provisions
  • what is an insurable interest?
  • what are common insurance categorizations?

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