Personal Lines Advisor, Scott Hammersand, helps us explore the differences between a captive and independent insurance agent.
Have you ever wondered what else is out there besides an insurance company with a catchy commercial, jingle, or khakis? We’ll help explain the options you have for protecting your home, auto, and assets, and whether that’s best with a captive or insurance agent.
First, let’s define “Captive Agency” and “Independent Agency” so we can look at the main differences for your home & auto insurance needs – also known as personal lines insurance.
(State Farm, Allstate, Farmers, and more)
A Captive Agency is a type of insurance company that operates in a closed environment. The underwriters, claims team, and agent all work directly for said company. Agents who work for a captive agency are not able to access the market, as they are only allowed to write their company’s policies and packages. Due to the limiting nature, captive agencies do not specialize and opt for a more straight-forward and generalized approach. This can be a benefit because it means they have a high acceptance rate; however, they may not always offer the specialized coverages that are needed. An easy way to identify a direct writer, or captive agent, is by mass media marketing campaigns or catchy jingles.
- Since captive agents only work with one company, they are more likely to talk with their underwriters daily.
- The agent’s company provides ample training to ensure they thoroughly know their products and will be able to say “yes” or “no” to risk right away.
- With only one option, captive agents tend to return a quote quickly.
- Because they only have one option, if rates increase, their only choice is to either offer reduced coverage or raise deductibles.
- Lack of flexibility and specialized options could lead to a less client-focused approach to business.
- The agent works for the company, not the client, which means if there is a disagreement on a claim, the client may need to hire outside assistance.
An independent insurance agency, also known as an “insurance broker”, operates in an open environment. Independent agencies work with the insurance companies, not for them. This is an important distinction as independent agencies work for the client to provide advice & counsel and are on the client’s side during a claim or disagreement. Since independent agencies operate in an open environment, they can carefully select options for their clients. These selections can be tailored and specialized to provide the best options for a specific type of client (High Net Worth, High Risk, Global, Rural, etc…) or can be broad as to provide options for everyone. The point of contact at an insurance agency may be known as your “Risk Management Advisor or Insurance Advisor.” Advisors identify your specific needs and then work with the appropriate companies to provide you with educated options to further discuss together. The advisor will make recommendations on coverages and help select the best package to ensure clients are covered correctly. An easy way to identify an Independent Agency is to see if they offer more than coverage option for your needs.
- Independent advisors are not tied to one company and can provide several options. If rates rise, they can seamlessly move the client to a better situation while keeping the same coverages and deductibles.
- The advisor works for the client and acts in a fiduciary role to ensure everything is done in the client’s best interest. If a disagreement were to occur during a claim, the advisor works with the client to ensure it is resolved correctly.
- Advisors have access to a wide variety of training available to them from the multiple companies they represent. Most agencies have designated underwriters from the companies they partner with, and may meet on a weekly or monthly basis.
- With more options comes more moving parts. They may be unable to give a “yes” or “no” on the spot without contacting several carriers to confirm the client’s best options.
- Quotes may not be generated in a matter of 15 minutes. Since the advisor is working with multiple carriers for each quote, it may take a day or two before all the offers have been properly reviewed.
- Less streamlined options are available online. Independent advisors do not have a major corporation providing massive IT support. They may offer self-made applications or smaller websites.
How to Decide Which is Right for You
It comes down to figuring out your priorities and goals before you know which option to select.
Captive Agencies are best suited for those people who value speed and ease. They may provide an option online to let you select your coverage limits and have documents in-hand within as little as 15 minutes. If you don’t fully understand your exposures, or understand the intricacies of properly protecting your assets and liabilities, this may not be the best way to seek insurance. This is why captive agencies are the largest provider of state minimum coverage limits for auto insurance in the nation.
An Independent Agency, would be best for those who value professional advice and plan for the long term. An advisor can offer a selection of companies, specialized endorsements, and provide cost-saving maneuvers when the market goes up. Independent agencies are also more adept at handling complex situations – or complex risks – as they have access to specialized markets. The first time you work with an advisor, they will gather the necessary information to check the markets every year, and if they find a better option, switching carriers is easy; plus, you will still work with the same advisor.
While neither is perfect for everyone, there is always the best option for you. If you have any questions that could help provide more clarity, please feel free to reach me at firstname.lastname@example.org. We hope this article helps educate you on personal lines insurance, and we look forward to providing more resources like this in the future.
About Overmyer Hall Associates
Overmyer Hall Associates is one of the fastest growing agencies in the country, quickly becoming one of the largest property and casualty insurance agencies in Central Ohio. Overmyer Hall Associates provides clients with insurance and risk management, specializing in Business Insurance, Surety Bonding, and Home & Auto Insurance. Since its founding in 2011, the firm has been awarded Columbus Business First’s "Fast 50" and "Best Places to Work" awards, the IIABA’s “Best Practices Agency” recognition, Columbus CEO Magazine’s “Best Insurance Broker” and the Columbus Young Professionals Club’s “Wonderful Workplace for Young Professionals” award. www.oh-ins.com