Prior to writing this blog post, I want to be up front in what some may consider a factor that could cloud my opinion; I am the owner of a Farmers Insurance Agency (
The Wertzberger Agency). Although that is a valid argument, I will do my best to be as neutral as possible and leave my personal opinion aside.
I wanted to write a posting in regard to a question we very often get or hear; What is better, a Captive Insurance Agent or an Independent Insurance Agent?
Prior to answering the question, we first need to define them both so we can accurately compare them.
A Captive Insurance Agent is an individual licensed to sell insurance of a given carrier. Examples of Captive Insurance Agents would be
Farmers Insurance Agents,
State Farm Insurance Agents,
AllState Insurance Agents, or
American Family Insurance Agents. Captive Insurance Agents can sell the carrier they are aligned with an no other. That is the fundamental difference between a Captive Insurance Agent and an Independent Insurance Agent (commonly referred to as a "Broker").
An Independent Insurance Agent is licensed to sell insurance with a number of different carriers. Although an Independent Agent can sell a number of different carriers, they can not sell insurance of companies that have Captive Insurance Agents. Carriers often sold by Independent Agents are Travelers, SafeCo, Hartford, Progressive, and Kemper Insurance. While Captive Insurance Agencies will have agency names that regularly reference the company they represent, Independent Agencies will have names just indicating they are an insurance agency, for example, ABC Insurance Agency.
So...which is better?? A Captive Insurance Agent or an Independent Agent? The answer is simple; it depends.
When asked which is better, the correct response would be it depends. It depends on what the intent is of the individual asking the question. Normally the question is asked by an individual searching for new insurance and they don't know which type of insurance provider to reach out to. If someone is searching for the cheapest possible policy, well the answer to which is the better option would be the Independent Agent. The Independent Agent has many options at their disposal and they will be able to usually find a cheaper option than a Captive Agent who can only provide products of one carrier. If someone is searching for a more quality product and willing to pay a few dollars more, the Captive Agent will be the better choice. I give this answer of Captive Agent's products being superior based primarily on thought that carriers provided through Independent Agents have to either cut out parts of their products' coverage or provide inferior claim service that encompasses not paying out very much, very often.
Think about it....
Think of things from an insurance carrier's prospective. Let's say YOU are an insurance carrier. Your insurance carrier is not sold by Captive Agents but through Independent Agents. Now you are well aware that every given Independent Agent has many carriers at their disposal. Given that, the only way you are going to sell any business is if you are one of the cheapest carriers. You have to maintain an extremely low price in order for the Independent Agent to sell your product. However, you also need to make money as an insurance carrier. Insurance carriers that don't make money are not insurance carriers for very long. So, that puts you, the insurance carrier, in a position where you have to make money, but also can't charge very much for your product. A rational conclusion would be that if you aren't charging very much (because you can't if you want your product sold), you are likely going to be very tight with the pocket book if/when a customer files a claim OR the coverage within your policy is likely such that it is not very comprehensive; there are many things excluded or really not covered well. You literally can not afford to pay out very much for claims - it could cripple you as an insurance carrier because you simply don't have very much money coming in! The fundamental method of doing business by insurance carriers through Independent Agents is flawed and it will lead to inferior products being sold. Inferior products will then likely leave the consumer open to a bad claims experience when used.
In conclusion, if you're going for cheapest, call a Independent Agent. If you are going for quality at a competitive price, call a Captive Agent.
Farmers Insurance - The Wertzberger Agency is happy to be a resource for Captive Agent seekers in the Overland Park and surrounding Kansas City area. Call us at 913-383-3276.
