Captive vs Independent Agents: An Inside Look at Insurance Agency

Independent agents or captive agents? Maybe this will help decide the kind of insurance agency right for you!

The insurance industry has a unique landscape here in the USA. If you’re familiar with the industry, then you know that there are three key players in insurance: 

  • The Carriers: who provide policies and settle claims, 
  • The Insureds: who hold the policies and pay premiums, and 
  • The Agents: who act as risk consultants and guide the insureds on their insurance options. 

Out of these, the agents are the ones who are most uniquely placed in the entire industry. They act as mediators between insureds and the carriers. They are the ones who advise people on the kind of insurance they need. Besides that, they take care of all carrier-related paperwork, bind policies, and serve the insureds in case of claims or renewals. 

Traditionally, insurance agency is done through two distinct channels.

How to become the right insurance agent?  

You have your captive agents, (the State Farms and Allstates), who can sell policies from a single carrier only. Whereas, the independent agents deal with multiple carriers. They have more freedom when it comes to offering choice to customers. They either work under the Franchise or the FMO (Field Marketing Organization) model.  

A third avenue slowly gaining popularity is the direct lines, where carriers sell directly to the insureds. 

Captive vs Independent Agents: Which is better?

We decided to settle the age-old question by having a short conversation with an insurance agent. She has experienced both sides of the aisle, Beth Kellerman.    

Beth has been involved in insurance since 1988. Having started as an underwriter for CNA, she progressed to risk management and insurance sales first as a captive agent for Nationwide in 1993. She then purchased her own independent agency in 2001. She is also a mother of two teenagers and is actively involved in her community. 

 When asked if she would prefer independent insurance agency or working as a captive agent, she had this to say:   

“It all depends on how many choices and opportunities you have. It is difficult to start and capitalize on an insurance agency, and the learning curve is steep.”  


“However, the captive agency environment isn’t very encouraging of growth. Agencies representing the same carriers are in constant competition with each other, so the opportunities are limited. The systems are still traditional, and there isn’t much in the way of choices to offer your prospects.” 

“It all ultimately depends on whether you can get enough support and capital to run an independent agency. If you can construct a good system for yourself, I will always recommend becoming an independent agent.” 

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Captive vs Independant Agent

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The distinctions between independent agents, captive agents, and direct lines are blurring

Carriers are seeing the value of providing a choice to the insureds. A recent article in Carrier Management notes that carriers are experimenting with multiple forms of insurance distribution to address the customer’s demands of choice.  

 “This phenomenon is evident in the industry today,” says Beth. “Carriers are being forced to adapt to newer technology and the demands of tech-savvy customers. They’re spinning their marketing to portray it as their idea, but those that weren’t nimble and able could not survive or thrive.” 

 Can you point out any specific observation that could clarify this shifting trend? 

 In addition, she also pointed the fact that carriers are working hard to transition their legacy systems to more of a web-based cloud environment. Isolated systems are restructured to a more modular and communicable system.  

 However, this is also causing them to shut down a lot of their traditional field offices, and push more servicing work onto the agents. Some carriers have even started charging agents for servicing work. 

So was there ever a good time to be a captive agent? 

“Yes”, says Beth.

“Through to the end of the 20th century, right before Hurricane Andrew and 9/11, which were major catastrophes, captive insurance agencies were able to grow to tremendous sizes, with support from the carriers.”

What changed for captive agents?

“I don’t know,” admits Beth. “One thing I did notice on the captive side was that the carrier custom of replacing a retiring agent on a one-to-one basis changed. Instead, carriers began to break up a retired agent’s books of business in to smaller pieces using them as leverage or seed books for starter agents.” 

 “So maybe that is the reason captive agents were so big, before the catastrophes mentioned above. The agency model for captive agents has never been able to recover and replicate in the same manner.” 


 “I can’t put out why, though. It could be a number of factors, like greed, lack of understanding, or lack of a proper model. It could be something missing in the 21st century. Not adapting to technology might seem like the obvious answer, but some independent agents have failed to adapt, yet they’re still large.” However, independent agents can pursue an aai designation to take their career to the next level and stand out in the ever competitive insurance market.


  “Agents need to understand that your insurance agency has to have a certain amount of cash flow to be profitable in the industry. There are certain levels you have to get past, and the first level, which is $2 million in written premiums, is hard to reach.” 


  “Carriers do not make it easy for captive insurance agents to reach that level. They want all their insurance agencies to be $5 million+ agencies. They want them to grow, but they do not facilitate growth. Maybe they facilitated this growth before and during the 1990s?”  

Independent Insurance Agents and Family

How to start an insurance agency and balance family at the same time? 

“I built my insurance agency while spending time with my family,” beams Beth. “My children are a part of my old agency staff photos. My community-based insurance agency was able to grow due to my involvement in the community.” 

Beth was able to build her agency while being president of the PTA and a sponsor for local football games. She based her networking, advertising, and community around her children’s school.

“My children don’t like going grocery shopping with me. I stop and talk to all my insureds along the way, and it always takes too long.” she laughs.

New, young agents are also going independent

According to Insurance Journal‘s 2018 Young Agents Survey, 89.2% of young agents are independent agents. Young agents today are hungry for opportunities and are naturally adapting to technology and innovation. So, the insurance agency management system is one of the innovations used by independent insurance agencies to increase the productivity of agents. Because of that, they want to see more people of their age going into independent insurance agencies. 

 “It ultimately comes down, again, to choice,” says Beth. “You sell insurance to the person you look at in the mirror. If I’m a millennial, my target market is millennials, and millennials love choices”.  

 Captive agents are simply unable to provide choice and flexibility to meet the need of millennials.

Ultimately, independent insurance agency is better

“Transitioning to an independent agent from a captive agent and the choices it gave me increased my profitability and retention dramatically,” admits Beth. “It allowed me to remain in the industry a lot longer than I would have been able to do if I was a captive agent. In this current market, I would not recommend the captive agency route to anyone.” 

While there are still a substantial number of captive agents, it is clear that independent insurance agency is becoming the clear choice for up-and-coming agents, as well as captive agents looking to become more relevant in the industry. 

What are your thoughts on this topic? Which one do you think is better? Being captive or going independent? 

Think we’ve missed anything out? Leave us a comment with your thoughts!

Click here for the Infographic
Captive vs Independant Agent

Learn how you can flourish as an agent after one call!

Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!


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