An impartial insurance agent serves as a liaison between you and several insurance providers. Since the early to mid-1800s, independent insurance agents have existed, which eventually led to the establishment of the Independent Insurance Agents & Brokers of America, Inc., a trade association, in 1896. Currently, the United States is home to over 36,000 independent insurance companies.
Learn about independent insurance agents before you begin dealing with them. Find out how they may help you and how they differ from other types of agents.
Definition of an Independent Insurance Agent
Independent insurance agents represent a diverse range of insurance companies, who typically give customers a choice of insurers, plans, and costs.
Independent insurance brokers typically market:
- Property insurance (such as homeowners, renters, and auto insurance)
- Life and health insurance
- Small business insurance and employee benefit plans
- Retirement products
- Non-standard auto insurance such as non-owner policies
How Does an Independent Insurance Agent Work?
Some independent insurance brokers work for themselves and promote goods from several insurance companies. They could have to go through business-specific training or apply for and receive approval to sell an organization’s insurance. Typically, the agent must demonstrate that they have a solid customer base and are suitable for sales. Other independent agents collaborate with wholesalers or insurer membership networks to offer carrier access and administrative assistance.
An independent agent searches through numerous insurance firms on your behalf when you request a quote. A qualified agent will present you with side-by-side pricing and coverage choices so you may weigh the advantages and disadvantages and compare insurers’ prices.
Additionally, independent agents could have access to carriers that the typical consumer cannot obtain online. For instance, the typical consumer cannot obtain Chubb insurance online and must speak with an agent in order to obtain a price.
The independent insurance agent receives a commission from the insurer when you purchase your policy. Regardless of the insurance company you choose, agent commissions are often comparable.
What’s the Difference Between Captive, Direct Sales, and Independent Insurance Agents?
You can purchase insurance through a captive agent, a direct sales agent at the insurance business, as well as from an independent insurance agency. Here are the three different categories of agents’ differences:
| Independent Insurance Agent | Company or Direct Insurance Agent | Captive Agent | |
| Definition | An insurance agent approved to represent and sell an insurance company’s products | An employee of the insurance company who sells its policies | An insurance agent who exclusively sells one company’s policies; usually an independent contractor, but may be an employee |
| What they sell | Policies from multiple insurance companies | Policies from the insurance company that employs them (and sometimes affiliates) | Policies from one insurance company (and perhaps affiliates) |
| How they’re paid | Receives a commission from the insurance company | Receives a base wage or salary and may also receive a commission or bonuses | Receives a commission from the insurance company |
| Insurers that use this approach | Progressive, Erie Insurance | Amica, USAA | State Farm, GEICO |
While direct agents and captive agents can only sell policies from one insurer, independent insurance agents are authorized to market products from several carriers. All earn commissions, although direct salespeople are more likely to be paid a base wage or salary.
Pros and Cons of Independent Insurance Agents
Pros Explained
- More choices for convenient shopping: More options for easy shopping: Independent insurance agents may offer a variety of coverages (health, car, RV, and business) from many different insurers, which can simplify your shopping experience without the need to compare rates over the phone or from websites.
- Local expertise and support: An independent agent is frequently a local business owner and resident of your neighborhood, so they are familiar with its risks. Normally, you can continue working with your agent forever. If you wish to patronize a nearby company, an independent agent can be a wise choice.
- Customized service: An independent agent will anticipate speaking with you about your individual requirements and living circumstances. They may thus be better able to locate special offers or superior coverage that more exactly suits your requirements.
- Good for complex insurance needs: If you have a DUI on your record, multiple homes in different states, a small business, or high-net-worth assets, an independent agent may be able to find you coverage more efficiently than you would on your own.
Cons Explained
- Not every insurer is accessible: Only businesses that have given their consent can be represented by independent agents. Additionally, an independent agent cannot present you with options from all insurers because certain insurance companies only sell their products through employees or captive agents. An independent agent might not be able to sell you insurance from companies like State Farm, USAA, Amica, or internet insurance companies like Lemonade, for instance.
- Possibly unable to offer rapid coverage: If you require coverage right away—say, let’s within the next 10 minutes—and lack the time to speak with an agent, ascertain your coverage requirements, and wait for the agent to look into your alternatives, an independent agent might not be a good fit.
Frequently Asked Questions
How do I become an independent insurance agent?
Depending on the kinds of insurance you want to offer, being an independent agent entails studying, finishing the required course requirements (specified by the state), and passing one or more tests. You can offer different kinds of insurance or policies in various states if you have a license. Before opening their own business, many recently licensed agents get expertise by working for an established firm. As you advance in your career, you will need more education.
How does an independent insurance agent get paid?
How can I tell if an agent is independent?
You can find out in a few ways:
- Ask the insurance agent directly: “Do you work with multiple insurance companies, or just [company X]? How many carriers do you represent?”
- Look for the website or advertising wording that describes them as an “independent agent.”
- Review their record with your state licensing agency and see how many insurance companies they represent.
