Captive Insurance Agents vs. Independent Agents (Similar or Different?) - Baily Insurance - Insurance in Southwestern PA Skip to main content

Captive Insurance Agents vs. Independent Agents (Similar or Different?)

Captive Insurance Agent vs. Independent Insurance Agent

Did you see that State Farm commercial with Patrick Mahomes and his friends in the barbershop? Or the one with Aaron Rodgers on the golf course? And the Geico, lizard? Have you spotted him on TV recently? What about Flo? Or Progressives newest star, Dr. Rick – helping poor souls who’ve turned into their parents?

National insurance brands sure know how to entertain us. But their commercials don’t tell us much about their product. They all make the same claims – lower prices, better products. 

One of the biggest differences with these companies is who is allowed to sell their products. 

Some of these companies appoint captive agents who are only permitted to sell their insurance line and nothing else. But other companies sell their products through independent agents that are appointed by many companies to sell insurance products. 

Do you know if your insurance agent is a captive agent or an independent agent? Why does it even matter?

When Baily Insurance Agency decided to tackle this topic in an article, I was the natural pick to write it. 

Why?

For many years, I wrote business with State Farm Insurance as a captive insurance agent. And then, in 2016, I made a move to Baily Insurance – as an independent agent. 

Having experience as both, I can give you the low down on the similarities and differences between captive agents and independent agents.

What is a captive insurance agent?

A captive insurance agent is an insurance agent appointed only to write insurance policies by one insurance company. 

State Farm, Allstate, and Geico are all insurance companies that will only sell their products through their agents. They don’t permit their agents to sell any products from any other insurance companies.

Hence the word captive. These agents are captive to a single insurance company.

What is an independent insurance agent?

Opposite of a captive insurance agent is an independent insurance agent. Independent insurance agents are free to write insurance through many insurance companies. 

Independent agents ask different insurance companies to “appoint” them to sell that company’s insurance products.

Progressive, Nationwide, Travelers, and Safeco are all companies that write insurance through independent insurance agents.

Hence the word independent. These agents do not rely on one insurance company for insurance products. They are independent and able to use more than one company to provide insurance for their clients.

How they are captive agents and independent agents similar?

To better understand what captive agents and independent agents bring to the table, let’s start by talking about their similarities. Here are the four biggest similarities that these agents share.

#1 With both captive agents and independent agents, insurance coverages are standard. 

No matter which agent you buy your insurance policy from your coverages will be the same. A homeowner policy will include coverage for your dwelling and its contents. It will also include liability coverages and medical expense coverages. Your auto policy will have liability coverage, medical coverage, and collision coverage.

And depending on the company, you can sometimes add extra coverages like roadside assistance to your auto policy or flood coverage for your home. 

But, in general, you will find the same coverages offered at both a captive insurance agency and an independent insurance agency. 

#2 Captive agents and independent agents are dependent on the insurance company for pricing.

Another similarity you’ll find is the pricing method used to determine insurance premiums. Every insurance company sets your premium amount according to various rating categories or table rates. 

Let me take a minute to explain what I mean by this. 

In terms of homeowner and auto insurance, insurance companies look at a variety of information to determine your premium rates. 

For instance, if you are looking for homeowner insurance, the company will have a “rate” for homes in Pittsburgh and a different rate for homes in Waynesburg and yet another rate for homes in Washington, PA. 

Or with car insurance, each company has rates they charge specific to your age – rates for youthful drivers, elderly drivers, and adult drivers. 

Insurance companies will also look at your credit history, payment history, and driving record to figure out which rate they will apply to your policy.

With life insurance, insurance companies “table rate” their policies. 

So using a rating table that their company has designed, they determine where you fall in their table. They use criteria like health history, age, smoking habits, and other lifestyle factors to determine your rate.

Where you fall on each companies’ rating group will determine what you will pay for insurance.

Your insurance agent can not control what the insurance company chooses to charge. They can simply apply on your behalf and offer you the pricing that the insurance company offers.

#3 Captive agents and independent agents can “bundle” your insurance.

All insurance companies offer some amount of discounts when you purchase multiple policies through them. This is called bundling.

So, if you are buying your home and auto policy from the same company, you’ll likely receive a discount

And usually, the more policies you purchase, the more you save.

#4 Captive agents and independent agents are the customer’s advocate.

The last similarity is that your insurance agent is your advocate.

In Pennsylvania, all insurance agents go through the same process to become licensed. And part of that licensing is agreeing to put the customer’s needs ahead of your own as the agent and ahead of the insurance company’s needs as well.

In Pennsylvania, all agents go to bat for their customers! You are the priority!

How are they different?

Captive and independent insurance agents also have some major differences.

#1 Independent agents have access to many insurance companies

The biggest difference between captive agents and independent agents is the amount of choice they can offer their clients.

Captive agents are only able to sell products from the insurance company they are appointed with. So, when you go to a StateFarm agent or an Allstate agent, they are only able to offer you insurance products that StateFarm or Allstate sell.

Independent agents are appointed to work with many insurance companies. So, at an independent agency like Baily Insurance, we can offer products from a variety of companies. We sell policies through Progressive, Travelers, AutoOwners, Acuity, and several others.

So, when you need to price out an insurance policy, an independent agent is a one-stop-shop. You simply give your information to your agent and they will give you multiple quotes.

#2 Independent agents have options for their clients even in difficult circumstances.

One other difference is that because of the number of companies that an independent insurance agent can write with, when you run up against a roadblock, your agent can help you find creative solutions.

Let’s look at a very practical example. Imagine you have a couple of accidents. Now your insurance company cancels your policy. What are you going to do?

If your policy is with a captive insurance agent, you will have to find a new insurance company to work with. You will carry the burden of shopping around for a new policy.

If your policy is with an independent agent, your agent will have other companies to write your insurance policy. Besides, your agent will also know which companies are friendly to people in situations like yours. Your agent will know where to go to get you coverage.

Independent agents can always find a solution. It may have to pay extra for the policy, but you will be able to get a policy. This is not the case for captive agents. There are times when a captive agent won’t have options for you.

#3 Independent agents can offer creative solutions.

One major difference is the ability independent have to offer creative solutions to their clients. Because independent agents write insurance with several companies they can mix and match when it comes to your insurance.

Let’s say that your teen driver has an accident that causes your insurance premium to go up… a lot! An independent agent can price out your policy with another company. They can also price out your auto insurance with one company and your homeowner with another company to see if that will lower your costs.  

They can even price out a policy just for your teenage child – an option that would never be a possibility with a captive agent. Maybe by placing your child on an independent policy, you will be able to stay with your current company and lower your premiums. (You may need to retitle the vehicle to do this, but a captive insurance agent would not have this option at all!)

All that to say, an independent agent can help you arrive at a solution using more than one insurance company to help you save money and still have the coverage you need.

#4 Independent agents more often write commercial business for larger companies than captive agents do.

Captive insurance companies tend to be more restrictive about what they will write and what they won’t write. And the risk involved with writing insurance for a larger business is often more than a captive insurance company wants to take on. So, you won’t find many large businesses insured by captive agents.

Independent insurance agents have many insurance companies to go to for insurance coverage for their clients. And among those companies, independent agents know which companies are willing to take on which risks.

Some insurance companies prefer to write insurance from companies in certain industries. For example, one company may want to write insurance for trucking companies. But they may not be as eager to write insurance for contractors.  

And as with personal insurance, independent agents usually have several companies they can apply to on your behalf. 

This competition in the market place usually works on your behalf. It requires insurance companies to contend for your business resulting in competitive premium pricing.

Not sure if you want to buy insurance with a captive insurance agent or an independent agent?

So how can you decide which is better for you – buying your insurance from a captive agent or an independent agent. This is a fair question.

I loved my years as a captive agent with State Farm. I helped my clients get a good product quickly at a good price. That is one of the things I love best about my work!

But now, as an independent agent at Baily Insurance, in minutes I can provide my clients with several quotes and help them decide on the insurance policy or package that will best meet their needs. 

And because I can quote out their policy with several different companies, I always get competitive rates.

For many of my clients, they like having an independent agent in their corner to do their “shopping” for them. When their renewal rolls around if their insurance company raises their rates, I have several other quotes ready for them without them needing to pick up the phone or stop by another agency. It’s convenient and effective.

Your decision will most likely come down to the relationship you have with your agent. Your agent is your advocate and having an agent who is honest, trustworthy, and hard-working is the best way to have a satisfying insurance buying experience. 

At Baily Insurance, we value our customers and want to take the very best care of their insurance needs. 

We work on your behalf! 

If you are looking for an agent who’s committed to giving you their best, give us a call. In a few short minutes, we can answer your questions and price out your policy. We’re excited to hear from you!

 

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