Differences Between Captive and Independent Insurance Agents

Fran Majidi September 3, 2022
captive agent vs independent agent

If you're an insurance agent or you are thinking of becoming one, you may be wondering how insurance agents get clients. You may assume the answer is straightforward, but things get complicated based on what kind of agent you are. What you should know above all else is that a road paved with quality leads is the only road to success for all insurance agents. If you keep coming back to this truth and make the leads rain, you will succeed. Now, let's get into the differences between the two types of insurance agents, independent agents and captive agents.

Which Type of Insurance Agent Makes More Money?

Both types of insurance agent jobs have their perks, and both independent agents and captive agents can have lucrative careers. Here is a list of important questions to ask when faced with choices about the type of agent you should become:

  • Which insurance company or insurance companies offer products you feel confident selling?

  • Do you want to work for a company that sells expensive, top-notch policies to the more affluent or do you want to sell policies that are competitively priced if not downright cheap?

  • Do you want to represent a big brand like State Farm or do you want to brand a company with multiple carrier options?

  • Do you prefer working for one company and getting more marketing support or is a high commission rate your number one incentive?

  • If required, would you also be willing to meet a quota for selling life insurance policies (some insurers require it of their agents).

Both types of insurance agent jobs have their perks, and both independent agents and captive agents can have lucrative careers.

Captive and Independent Insurance Agents: What's the Difference?

As a captive insurance agent, you can only sell your insurer's insurance products. You'll likely know the ins and outs of the insurance you're selling better than an independent insurance agent but you're limited to the brand that pays you.

How do you get clients? Captive insurance agents are most often given sales leads. Sometimes, especially in the area of life insurance, captive insurance agents buy leads at a discount from their employer to grow their business. In both scenarios, the clients are the insurance company's clients and are managed according to insurance company rules and priorities.

Captive agents have to meet quotas set by the insurance companies.

Independent insurance agents have many brands and verticals to sell and can be more objective about what works for one client versus another. It's also possible to cross sell from other carriers, mixing and matching to create a custom plan for clients. Independent agents are almost 100% on their own to generate leads, but then again, they are their own boss and the clients (and higher commission) are theirs. Captive agents have to meet quotas set by the insurance companies.

Independent agents are almost 100% on their own to generate leads, unless they partner with a lead provider.

Do Independent Agents or Captive Agents Get Free Leads?

You will only close a small percentage of the leads you generate yourself or buy so prepare to hustle, especially if you're an independent agent. When you are a captive agent, you are not only given your marketing materials by the insurance company but you're also given leads, client referrals and even cost-share for buying leads. With that said, you're getting paid a lower commission than independent agents. But compensation for captive agents can also be fruitful, and some agents even make an end-of-the-year bonus for doing a good job and selling lots of coverage.

Does Comparing Rates Sell More Policies?

For some prospects, the choice is everything when it comes to coverage options that meet their insurance needs. Independent agents have the ability to compare rates with several insurance companies, an option captive agents do not have. When a car insurance shopper sees that an independent agent can offer several quotes at once, they get excited.

An insurance agent who can offer options without a parent company pushing one type of insurance policy is often at an advantage, especially if the insurance agent sells insurance products from insurance companies that offer low-rate insurance policies.

On the flipside, some consumers want a brand they can trust, which is what many captive agents are selling above everything else. They are less concerned with saving money on, say, auto insurance than knowing they are protected in the event that something goes wrong.

Generating Leads or Buying Leads: Which Is Better for Me?

Honestly, it all comes down to your personality. Do you want a higher ceiling but the expectancy to climb the wall all by yourself or do you want someone to give you a ladder and set you up on a less lofty ceiling that is closer to reach?

If you're of the first set, you'll work hard but you'll probably meet the kind of success you're seeking as an independent agent. The hustle is more grueling but the payoff can't really be beaten. Do keep in mind that you will have to invest your own money, which means risk. It's much like the stock market or any financial market: The risk matches the potential for a high return. If this is you, buy leads from SmartFinancial, which is number one in client support. Agents partner with SmartFinancial to meet more people who are in the middle of their insurance shopping experience and show interest in getting a free quote.

If you are not the most self-motivated individual or if you want a more direct line to a parent company, being a captive insurance agent is much easier, but by no means is it easy. Even though you're not making as much money per close as an independent insurance agent, you're working hard as a captive agent too. Being a captive agent is much like investing your earnings in a 401K versus a Roth IRA: there's not as much risk. You're still earning, but the potential is greater with a Roth IRA -- and so is the potential for loss. It's less sink-or-swim as a captive agent, and you won't be spending as much money on buying insurance leads, business cards, direct mail material and advertising costs. So, choose whichever road suits you better.

Where Do Insurance Leads for Captive Agents Come From?

If you're given free insurance leads from the insurance company you work with, chances are that they spent money on your behalf. Marketing departments generate these leads with content and on social media. The leads are then handed off to agents. Even then, most agents partner with at least one outside lead vendor, sometimes multiple vendors. Carriers and agents can buy books of leads, data lead bundles and live-transfer calls.

Every method of lead generation has a price tag, so you're never getting anything for free; hence the lower commission from the insurance company for captive agents, who are often given leads or have a cost-share program with vendors like SmartFinancial.

If you're comfortable with the idea of being a captive agent and making a little less per sale, you may even decide that you'll work really hard and will have success, especially since you have leads fed to you on the regular. Yes, that motto can work for you. Note, however, that some (but not most) insurance companies will charge a captive agent upfront lead costs for selling certain types of insurance.

If you're thinking of working for an insurance company with this practice, compare those rates with what an independent agent would be paying to buy the best organic leads from a reputable leads provider like Smartfinancial. If you're a captive agent, see if your carrier offers cost share programs with SmartFinancial.

How Do Insurance Agents Get Paid?

Captive agents either make a salary or a salary plus commission. Captive agents may even get an end-of-the-year bonus. An independent insurance agent either works for an independent agency or as their own boss. In the former scenario, the captive agent will again be paid a small salary with a commission (and a possible bonus). As an independent agent, you'll be paid only on commission, so you're always out to close. Insurance carriers that work with independent agents rarely give bonuses and don't offer cost-share programs, just higher commissions on insurance policies.

Should Independent Agents Buy Insurance Leads?

There's been a pretty healthy debate on this question ever since technology companies began to leverage their Internet skills for large profits. Now, it seems that most insurance agencies and carriers are looking to tech firms to give them a large chunk of their leads. So, the answer is yes, you should buy your leads, but you should use these leads wisely.

For one thing, you cannot shore up on leads and take your sweet time reaching out to them. Often, the leads are actively looking to make a purchase so if you're not calling right away, it's just one fat loss. If you plan to buy leads and call them all right away and begin the process of pursuing until they give in, then do it.

Make sure to work with leads companies like SmartFinancial, which fosters the growth of their partner agents. Buy the leads at a fair price, but don't expect them to all pan out. Just like the leads you generate, not all of them are golden eggs. Go into the process with realistic (but positive) expectations and you will win.