If you’re thinking of breaking free and becoming an independent insurance agent, now could be the time. In the current hard market, there’s incredible opportunity for new agencies. Factors like inflation and an increase in natural disasters are multiplying, resulting in rising premiums. Higher premiums lead to more clients searching for better deals, which gives new agencies looking to capture prospects an advantage over older agencies who have to play defense by focusing on renewals without the peace of mind of knowing they’re in control of their futures. As revenue decreases for insurance carriers in this tough market, they become more willing to try different agencies to improve sales. This creates another great opportunity for new agencies to add insurers they wouldn’t usually have access to with better coverage options and an opportunity to offer the best rates to clients at competitive prices.
What Is a Captive Insurance Agent?
A captive insurance agent is limited in the work they can do by the insurance company they sell for. They have a prescribed set of insurance policies and insurance products that they can sell, as well as limited insurance carriers they can work with to meet individual client needs. This restricts their ability to provide the optimal insurance coverage for their clients in lines like auto insurance, homeowners and renters insurance, and life insurance. The insurance industry is in the midst of transformation to meet the growing insurance needs of clients. Now is not the time to wait and see what the future holds for captive insurance agents.
The Pros of Becoming an Independent Insurance Agent
Now could be a fantastic time to take the plunge and become your own boss. But there's a lot to think about if you're toying with becoming an independent agent. Let’s examine some benefits of branching out on your own versus staying with a larger agency.
- Increased Product and Carrier Options
Independent agents have the advantage of being able to customize coverage to meet individual client needs, unlike captive agents who can only sell parent company products.
- Higher Earnings Potential
More control over pricing and underwriting gives independent insurance agents the potential to earn more than captive agents, as does receiving commissions from multiple carriers.
- Greater Client Retention
A broader selection of insurance products and the ability to more easily move clients to new carriers means keeping clients that captive agents might lose.
- Improved Flexibility and Autonomy
Independent agents enjoy more freedom and flexibility at work with the ability to set their own schedules and make their own business decisions and marketing strategies.
- Diversified Income Streams
Diversified income streams through different types of insurance (e.g., car insurance, homeowners, life insurance) offerings give independent agents the potential for greater stability by eliminating reliance on a single product line.
- Business Growth Opportunities
Independent agents can more easily form agency partnerships and bring other agents on board, meaning there’s more potential for scalability and increased profits.
- Reduced Risk of Company Changes
Since they aren’t tied to a parent company’s policy options and strategies, independent insurance agents aren’t subject to changes and mandates from above that could affect their book of business.
- Access to a Broader Market
With more freedom to market to a broad client base across geographic areas, independent agents can reach and win over more customers than captive agents.
- Long-Term Business Ownership
Independent insurance agents who own their own businesses have a share in the equity. This means they can benefit in direct proportion to the company’s growth and cash out when they retire, unlike captive agents.
- Market Resilience
With more opportunities to offer diverse products from a wide range of carriers, independent agencies have a better chance of withstanding economic downturns.
From the increased profit opportunities to the greater autonomy and flexibility, becoming an independent insurance agent offers many benefits over remaining a captive agent. We hope this blog has given you useful insights as you consider how best to move forward in your career. For more information about becoming a free agent, including a 13-step guide to launching your own independent insurance agency, read our eBook How to Become an Independent Agent: An EZGuide.