The Pros and Cons of Being an Independent Insurance Agent

Katie Wilmoth | January 31, 2022

Captive vs. Independent — What Route Is Right For Me?

An insurance agent at the middle of a maze, representing the different routes an agent can take to being captive or independent.

Are you thinking of starting your own insurance agency and can’t decide whether to go the captive or independent route? We’ve got you covered!

Starting an insurance agency requires a significant amount of time and effort. In the insurance world, it can be difficult to determine whether to go it alone or join a captive company — there are many pros and cons to both options. Much of your decision depends on your level of experience, financial situation, and general knowledge of running a business.

Here are the positives and negatives of both types of agencies, so you can decide what’s right for you.

What's It Like Being a Captive Insurance Agent?

Benefits of Joining a Captive Agency

When you join a captive agency, you’ll be handed an established set of guidelines and rules on how to set up and run an agency. Much of the decision-making and guesswork is taken out of setting up your business, as you’ll receive operational and administrative support, as well as marketing assistance.

Your company will funnel referrals and leads to you, and you won’t have to rely solely on your own marketing efforts to find new business. You’ll also benefit from a national marketing budget and brand recognition right on your front door.

You will likely have the stability of a paid salary with commission. This can be one of the biggest reasons agents choose to go the captive route as they learn and build an agency. The financial stability that comes from being a captive agent as you grow your client book is important for many agents just starting out.

The Downsides of Being Captive

You won’t have as much control over your agency or the decisions you make for your business. Your company will have a certain amount of control over your business operations, hours, and more.

Perhaps the biggest negative to going the captive route is your inability to offer more than one product to your customers. Sometimes the products you’re required to sell may not be the best fit for your customer, and you won’t have the ability to offer other options. This can result in difficulties keeping existing clients and/or closing new ones.

Captive companies also may have very restrictive contracts or heavy volume requirements — they may also change the products they offer at any time, leaving you with limited options for your clients.

Why Become an Independent Insurance Agent?

Pros of Starting Your Own Independent Insurance Agency

A young independent insurance agent reaching out to shake a hand.Choosing to go independent can offer you a significant amount of flexibility in running your business. You will essentially be your own boss. You'll have complete control over:

  • How your agency operates
  • Business hours
  • Staffing decisions
  • Company partnerships
  • Marketing strategies
  • And more!

Perhaps the biggest reason agents choose to go independent is because they can offer a multitude of different companies and product lines to their clients. This gives you the freedom to create a custom plan at a competitive price for your customer, which can significantly impact your ability to close leads and retain existing clients.

Independent agents can partner with clusters, aggregators, and agency networks that can give them access to higher commissions, lower production requirements, and exclusive incentives offered by different carriers.

Cons of Being Independent

Many agents feel intimidated by going independent without the guidance of a parent company that provides business operational guidelines, marketing ideas and support, and product training.

Getting appointed with carriers if you’re just starting out can be challenging if you don’t already have an established book of business. It can also feel daunting to learn the ins and outs of multiple companies’ products. Whereas a captive only has to learn a single company’s products, independents must spend a significant amount of time learning and staying up-to-date with each of their carrier partners’ offerings.

It can be financially challenging for many people to accumulate enough start-up capital and/or continuing business expenses while they work to establish their book of business.

Where's Should You Go From Here?

An illustration of an insurance agent with a magnifying glass, inspecting which career choice is best for him.While some agents perceive that going independent presents more challenges, the rewards can also be much greater. To combat the challenges of being an independent agency, you can partner with an agency network like Smart Choice. We can provide you access to carrier appointments, markets, product training, in-house underwriting help, and guidance in your business operations from dedicated regional staff. Starting your own business is always risky, but with the right tools and support system, you don’t have to go it alone!

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Katie Wilmoth