When an individual plans to buy an insurance policy, the first thing that he would need to do is to get in touch with a reliable insurance agent. Insurance agents are those individuals who specialize in marketing and selling different policies on behalf of an insurance company. The policies that these insurance agents sell range from life insurance to health insurance to disability, long-term care, short-term care, casualty and property.
Insurance agents are primarily of two types – independent insurance agents and captive insurance agents. A captive agent belongs to a particular company and sells products offered by that company alone. An independent agent has no such mandate and is free to choose whichever company’s product he will sell.
There are certain things to keep in mind before one can settle for an agent. A captive agent usually has lesser options as compared to independent agent. He will sell only the policies of the company he works for; whereas an independent agent may have a lot of options for interested individuals. One needs to carefully study what the agent is trying to sell. All agents receive some sort of a commission from their company. This results in most agents promoting the products of those companies only that pay them a handsome commission.
So, when considering an agent one must first understand whether the insurance agent is selling a product because he has the client’s interest in mind or his own. Trust is the next big thing that comes into play. Be it a captive agent or an independent one, he must be trustworthy. If not then buying from him is not worth it.
Advantages of independent insurance agents:
- They are usually associated with more than one insurance agency at the same time.
- They can offer a wider range of products to choose from.
- They have greater options to suit an individual’s needs and allow individual buyers to compare products from amongst a wide range of insurers.
- They have no mandate that they need to sell products of a particular company only.
- They are entitled to receive commissions from all the insurance companies whose products they can sell.
Disadvantages/challenges of independent insurance agents:
- They may tend to promote only those products/companies that fetch them higher commissions.
- They may not always have the benefit of the insured’s family in mind, since they are mainly commission based.
Advantages of a captive insurance agent:
- They are mainly salary based.
- They draw their resources from the parent company.
- They may have a direct access to the reinsurance market.
- They are entitled to wider employee benefit options.
Disadvantages/challenges faced by captive agents:
- They may be prohibited from selling other products than those of the parent company.
- There may be loss of clientele if parent company decides to discontinue selling a certain product as a result of it being unprofitable.
- Agents may be forced to promote certain policies over others by the parent company.
A quick comparison between independent agents and captive agents:
|Independent Agent||Captive Agent|
|1. Is in a position to give competitive prices to clients.||1. Can quote product price only from the company under whose payroll he is.|
|2. Is not beholden to any particular company.||2. Is beholden to a particular company.|
|3. Can offer policies from other insurance companies to suit client’s unique needs.||3. Must restrict himself to promoting only particular products of a particular company.|
|4. They are commission based.||4. They are mainly salary based.|
|5. They are not entitled to wider employee benefits but only commission.||5. They are entitled to wider employee benefits.|
Becoming an insurance agent:
- Preference is given to those with knowledge in finance, accounting, math, business, public speaking, and economics. Get a bachelor’s degree in business or economics.
- Proficiency in software used by the insurance industry is required.
- One may work in an insurance agency for part-time while getting a degree.
- Agents may need to clear their state’s exam for mandatory insurance license.
- Many states may require the insurance agents to attend continuing education classes.
Insurance agents can have a rewarding career provided they have the zeal to excel and the stamina to widen their client base.