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Understanding the Difference Between Captive and Independent Health Insurance Agents

December 20, 2021   |   by Alex Strautman
captive-vs-independent-insurance-agents

If you are considering a new career as a health insurance sales professional, one of the early decisions you need to make (after choosing your license type) is how you want to work. Do you want to be an independent agent or a captive agent employed by a bank, insurance agency, or large insurance carrier?

The choice is yours. There are advantages to both paths, as we’ll explain in this comparison.

Captive Agent

As a captive insurance agent, you’re generally associated with a single health insurance company/carrier or agency. That can work well for many individuals. Perhaps you know someone who is a successful captive agent affiliated with State Farm, Geico, or Allstate. It can be a lucrative career.

A captive insurer often provides a base salary, benefits, and office space (a cubicle in an office environment). Or, you may be able to set up your own office, subject to corporate guidelines. You’ll probably also receive marketing support to promote various insurance products and services offered by your employer.

There may be a reduced opportunity for you to develop your own marketing; that’s because your carrier or agency (or the bank you’re employed by) has already created a marketing plan and sales promotion campaign for all affiliated agents. Some companies/agencies offer more flexibility than others.

Independent Agent

In contrast, as an independent agent, you often have considerably more freedom. If you’re a self-learner looking for the flexibility to work from home, your local coffee house, or another location of your choice, being an independent sales rep may be more appealing. You can choose your own work hours (not work a schedule determined by others), and offer coverage from multiple carriers or plan administrators. You can also have more say in creating a branding and marketing campaign for yourself.

Independent But Not Alone: A great way to get additional sales and marketing support as an independent agent or broker is to align yourself with a General Agency (GA). The right GA can help you or your agency develop your own marketing plan, and give you the ability to write coverage through a broader range of carriers and administrators.

Being able to offer coverage and services from more than one organization can help you serve the diverse and evolving needs of your customers. You do not have to “settle” for a plan from Carrier A just because that’s who your agency or bank is aligned with. As an independent agent working through a GA, you can have access to dozens of insurers.

Here’s a closer look at the Pros and Cons on being an independent agent, as compared to working for an agency, bank, or carrier as a captive agent.

Below is a snapshot comparison of Large Group versus Small Group.

The Pluses and Minuses of Being an Independent Insurance Agent

(Vs. Being a Captive Agent)

 Pros Cons
Greater flexibility: choose when and where you want to work (select your own hours and workspace; develop your own marketing plan; set your own rules). You are essentially self-employed, so you determine your work/life balance. Being your own boss means you have more decisions to make. You have to search for and sign a lease for your office, determine your work hours (that are convenient for your prospects and customers), create your own marketing plan, get your own benefits, etc.
Your income potential is unlimited; you can earn commissions and bonuses from multiple insurers and plan administrators. You don’t have to sell products you don’t believe in – just because they offer a bigger profit for your employer. You decide what you sell. You have no monthly income guarantee – income is commission and bonus based. Your earnings could vary from month to month; what you earn has to pay for all of your overhead (space, phone, equipment) and still provide enough income for you.
Independent agents are not reliant on a single carrier to make money; you are able to sell products and services from many insurers. Not all insurers are available to you and your customers (some work exclusively through captive agent networks); one example is State Farm.
Agents representing a range of plans may be more able to address the special needs of clients; you can “mix and match” coverage to find the plan that is right at a price that fits your client’s budget. Representing a number of insurers can be confusing because each carrier has its own underwriting guidelines and rules. That can be overwhelming for some agents.
Your income potential is unlimited; you can earn commissions and bonuses from multiple insurers and plan administrators. You don’t have to sell products you don’t believe in – just because they offer a bigger profit for your employer. You decide what you sell. You have no monthly income guarantee – income is commission and bonus based. Your earnings could vary from month to month; what you earn has to pay for all of your overhead (space, phone, equipment) and still provide enough income for you.
Independent brokers can get no-cost sales, marketing, compliance, account management, and other support from a General Agent partner. Captive agents usually get marketing support from their employer and/or the insurance company they represent.
Employers often prefer working with an independent agent because they believe they stand to get a better deal because you are not dependent on any single carrier or health plan. A captive agent may benefit from advertising done by his/her/their employer, so it may easier to attract new business without spending a lot on marketing and related costs.

 

 


The Choice Is Yours

Whether you choose to become an independent agent or a captive agent, both career paths offer great opportunities. You can earn a good income, often choose where and when you want to work, and collaborate with a variety of individuals (alongside you or backing you up at a GA or insurer). Most importantly, you get to help your clients find the right coverage to fit their individual, family, or employees’ health care needs – and their budgets.

If you think being an independent agent is the right choice, consider selecting Word & Brown as your general agency partner. We have been helping brokers expand their sales – and support their customers – for more than 35 years. We offer a diverse product and services portfolio backed by “Service of Unequalled Excellence,” That makes it easier to keep your clients coming back year after year.

To learn more – including how much you can make – download Word & Brown’s kick-starter guide, 6 Steps to Getting Your Health Insurance License.  Or, contact one Word & Brown’s six offices in California and Nevada.

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