In the realm of insurance professionals, there are two broad types- brokers and agents. Beyond this, agents are either captive agents or independent (non-captive) agents.
The word ‘captive’ implies restriction of some form. Captive agents are mandated to deal exclusively with one insurer. In that regard, they are like employees or contracted workers. Their sole purpose is to source business for the insurer to which they are contracted.
Captive agents have some freedom of movement. However, if they wish to work with a new insurance company, they must cease ties with the previous company. Captive agents have a duty to their insurance company, but it is not above their fiduciary duty to their clients. However, less scrupulous captive agents just try to sell you whatever their insurance company is selling.
A captive agent can refer a potential client to another insurer. Whether such an agent is willing or able (by virtue of knowledge and experience) is another dimension. For this reason, an insurance prospect should source the views of multiple agents associated with different insurance companies.
Although the word ‘captive’ has a negative connotation, insurers typically provide such agents with benefits. These benefits include group plans (life, health and pensions), subsidies, sponsored training and credit union membership. Some captive agents earn a base salary in addition to sales commissions as well.
Captive agents have some freedom in managing their operations. Some captive agents may become incorporated agents. Such agents may have their own office or they may use the insurer’s premises to conduct business. High-flying incorporated agents may appear to be very independent (in common terms). It does not alter the fact they work exclusively with one insurer, however.
Captive agents may not offer a range of options to potential clients. However, they may have better insight into the policies offered by their insurer. As such, a captive agent may be a valuable resource when you are seeking an insurance solution.
Many insurance professionals begin as captive agents because of the resources provided by the insurance company. Start-up costs are minimal and the insurance company provides employee benefits. However, being a captive agent has demerits that arise from the restrictions of dealing with a single insurer who is in charge.
Depending on the nature of the insurance solutions that you seek, a captive agent may or may not be the most appropriate. If you are deciding to enter the insurance industry, commencing your insurance career as a captive agent is recommended. Although insurance companies are hiring fewer captive agents, they play an important role in the insurance industry.