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Choosing the Right Insurance Path: Captive Agent, Direct Writer, Independent Agent, or Broker?

January 10th, 2023 | 5 min read

By Daniel J. Middleton

To the layperson, the insurance industry comes with complexities, reams of paperwork, and mind-boggling logistics. And buying insurance is no less complex.

If you’re the average CNY resident, purchasing insurance has never been more accessible since it can be done through various methods. You can use agents, brokers, or, in some cases, “buy direct” from an insurance carrier. Each method has its pros and cons, and it can be difficult for the average person to know which option is best for their specific situation.

That’s why it’s critical to conduct careful research before buying insurance. Clients who choose Horan as their insurance agency benefit from the combined years of experience we bring, which eases their burden and straightens the learning curve.

We’ll discuss the various options for purchasing insurance in greater detail and help you decide which best suits your purposes.

Buying Insurance “Direct” from the Carrier

Buying direct means making a phone call, using an app, or logging onto an insurance carrier’s website and entering information to receive a quote for a given policy. If you like what you see, you purchase the policy. There is no insurance agent or broker involved.

Some do-it-yourself (DIY) folks go it alone in all aspects of life, including shopping for insurance. You may be one of these people and think it’s probably cheaper to buy direct from an insurer. The reality is it can be more expensive.

But cost aside, buying direct limits you from being able to choose between multiple insurance companies and comparing the various policies on offer. The few options available will also take up valuable time and energy while lacking the expert policy advice you’d receive from someone who knows the ins and outs of the insurance business.

There’s another option: using an insurance agent or broker.

What’s the Difference Between Insurance Agents and Brokers?

In the world of insurance, people use the terms “agent” and “broker” synonymously, but there’s a difference between insurance agents and brokers. Some of their duties and functions overlap.

For instance, both have a vast understanding of insurance policies and can supply you with quotes from several carriers. But there are instances where brokers tend to specialize in one area, such as life insurance.

While both can get you quotes from insurers, once those quotes are in, only insurance agents have the power to sell insurance or “bind coverage.” Brokers can’t.

In a moment, we’ll discuss the various kinds of agents that exist, but know that insurance agents are contracted with insurance carriers and are appointed to sell various policies via those contracts. Brokers usually have no such contracts, so the broker has to secure coverage with the carrier after receiving a quote.

Critical Differences Between Insurance Agents and Brokers

Here’s a quick overview of the critical differences between insurance agents and brokers. Knowing these differences can help you decide on the best option for your policy search.

While the two differ in some areas, certain insurance agents also function as brokers. That means they have existing contracts with select insurers but can also source policies from carriers they have no contracts with. That widens the field of choices to allow for optimal policy coverage.

Types of Insurance Agents

Now that we know the differences between insurance agents and brokers, let’s explore the three types of insurance agents. Understanding their functions and capabilities is also critical when determining which is best for you.

Many people know the different types of insurance agents you can work with, just not by the terms you’ll see here.

The following descriptions include each type of agent and examples of what they do. You’ll also learn which types of people prefer a particular type of agent. Knowing this information allows you to decide which type of agent you’d like to work with first. You can connect with more than one type of agent, similar to getting a second opinion from another doctor.

Captive Agent

Captive agents work with one specific insurance company, the only company they can represent. That one company may have subsidiary companies branded with different names. But the primary company has exclusive control over what companies the captive agent can represent.

Sometimes captive agents have their own office and staff. They also work in a central location with many other captive agents representing the same company.

These captive agents receive a combination of a base salary plus commissions, but the salary plans vary from one company to another.

One company may have a smaller base salary plan but a more significant commission percentage. Another company may pay a higher commission in the first year but a smaller commission when the insurance policy renews.

Often, captive agents work with a company that operates coast to coast. There is office support to help process paperwork, claims, payments, and other insurance matters. The company also uses an advertising budget to help generate business for its captive agents.

Examples of captive agent companies are State Farm, Allstate, and Liberty Mutual.

Direct Agent (or Direct Writer)

There can be blurry lines when defining the difference between a direct writer and a captive agent. Depending on the insurance company, the terms can be interchangeable.

Both work for and can only represent one insurance company (often a national entity). There is typically a national advertising campaign, an advantage for direct agents—but that applies to direct and captive agents.

Direct writers often work in a centralized office environment rather than having separate office space. The office will likely have cubicles rather than individual desks.

Direct writers are more likely to be paid a salary. If there is a commission portion of their compensation, it will not be a majority of what they earn.

Examples of direct writer companies are GEICO and USAA.

Independent Agent

Independent agents represent multiple insurance companies. Those agents can write policies they believe have the best coverage at the best price for their clients. That degree of flexibility can be advantageous to the consumer.

The flexibility also favors the agent who maintains a relationship with the client when they switch insurance companies. The arrangement saves everyone time, energy, and effort.

Insurance companies don’t pay independent agents a salary, unlike captive and direct agents. Independent agents only receive commissions. But some independent agents work in offices where employers pay them a salary. That is very different from being paid a salary by the insurance company.

Independent agents typically represent regional insurance companies that only write insurance policies within a specific geographic footprint. Often, these regional insurance companies write policies in several states but not coast to coast.

The agent will primarily pay the marketing budget. Some assistance could come from the regional insurance company, but only as reimbursement for locally co-branded marketing rather than Super Bowl-level advertisements.

Which Type of Insurance Agent Should I Choose?

Are you the type who loves to research and prefers to make decisions without assistance from a third party or an agent? Suppose you have confidence in the types of coverage available from an insurer and the amount of coverage you need, and you’re ready for the insurance company’s price. In that case, contacting a direct writer may be your path.

The conversation will likely be via an online chat or phone call, not face-to-face.

If you fit the description above, the path of the captive agent may also apply, with one notable difference. You’ll likely get to an office and sit with the captive agent. As with the direct agent, the captive agent will only represent one insurance company. But being able to visit an office for that conversation is helpful for some folks.

An independent agent will be local, allowing for an easy face-to-face conversation. This agent will have relationships with multiple insurance companies to develop the needed insurance policies. An advantage that the independent agent has is if one insurance company raises insurance rates or alters necessary coverage for whatever reason, they have access to other companies.

Think of an insurance agent in this way. You’re a movie celebrity or an athlete, but instead of calling studios or team owners to secure a role in an upcoming film or a spot on the team, you have an agent who does that for you.

Insurance agents know their business and have relationships with various insurance companies. Once an insurance agent represents you, they’ll do their best to pair you with the insurer whose policies best fit your life and circumstance.

Full disclosure: we at Horan are independent agents representing multiple insurance carriers. We take pride in searching for the best coverage at the best price. So consider us as an agent on your journey if you’re trying to learn how to get car, homeowners, landlord, renters, or even business insurance.

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Daniel J. Middleton

Daniel is an accomplished content creator. He has been working in publishing for almost two decades. Horan Companies hired Daniel as its content manager in November 2022. The agency entrusted its messaging to him. Since then, Daniel has written insurance articles, service pages, PDF guides, and more. All in an effort to educate CNY readers. He's helping them understand the world of insurance so they can make informed decisions.