Approximately seventy-five percent of the insurance market is run by a combination of ‘’captive’’ and ‘’direct’’ insurance carriers. Captives are large local sales forces, like Allstate, Nationwide and State Farm. Directs are companies that bypass a sales force and sell directly to the consumer, like Geico, USAA and The General.
With these companies dominating advertisements across the nation, it’s no wonder the remaining 25% of the market is run by independent agencies, like my company, Red Rock Insurance Group. Whether you’re a consumer of insurance or you’re an agent deciding on your next career path, you should understand the difference between independent, direct and captive agents.
An independent insurance agent isn’t bound to one company, meaning they can provide a plethora of options to find the best fit for their clients. These options are undoubtedly beneficial for consumers, but if you’re choosing to be an independent agent, you should be aware that you’ll need to be familiar with all different aspects of the carriers you have access to.
Independent agents are local and licensed in the state they’re working in, so they’re easily accessible for questions. These agents have a wide variety of training available to them because of all the companies they represent, and they’re pros at seeking value for their customers.
Direct insurance agencies, also referred to as “online insurance,” have grown in popularity as people have become more comfortable with online shopping. If you’re a fan of technology, you might enjoy having the insurance app on your phone, and the ease of accessing quotes. This probably all sounds great, but there are some serious fallbacks to consider.
The lack of a personal agent may or may not reduce cost, but can be frustrating because you’ll probably never speak to the same agent twice if you call. Additionally, the consumer is responsible for changing and managing policies, so any mistakes or oversights fall on your shoulders. Technology and the coverage options found in the “guts” of the policy can be confusing for some and there’s no local agent to speak with in a time of need.
The most recognizable names in insurance are usually found in the captive sector. Because each agent can only offer insurance from one company, they generally have in-depth information and training about that company’s services. As an agent, you’ll benefit from the advertising and marketing done by the parent company. But for consumers and agents alike, there are some things to consider.
You’ll only have one insurance option, so if the parent company discontinues certain options, it could be inconvenient for some consumers. As a consumer with a strict budget, you might have to reduce coverage, raise deductible, or opt for a higher premium when rates increase. Insurance companies should be focused on the client, but the lack of flexibility and options sometimes makes it difficult for captive agents to provide the best possible service.
I may be biased because of my own business, but there’s a reason I went into the independent insurance sector — it’s because I truly believe it’s the best option for customers and agents alike.
Here is a YouTube video I made a couple years ago that outlines the benefits of independent agents like the ones you’ll find at Red Rock Insurance Group.