Captive agent

Captive agent is an insurance agent that works for only one company. As opposed to direct writer, captive agent usually is not an employee of the company .

Agent is the person who receive his own salary/income as a commissions from companies, which products he is selling to customers, he/she cooperate with insurance companies. Commissions which they receive is calculated on a base of price of the insurance policy which he/she already sold to the client. Captive agent can offer all the products of one insurance company or only some, depending on strategy of the company. The parent company decides what products captive agent sells.

The captive agent can be opposed to independent agent, who works on his/her own and can offer products of multiple companies. The offer of independent agent can be therefore better suited for customers. However, the captive agent usually knows the products better, knows more about them and obtains informations faster.

Terms of cooperation between captive agent and insurance company

Captive agent is the person who is taking action on behalf of only one insurer. He needs to sign loyalty agreement and the person like this is obligated to submit business just for the enterprise which he works for. The contract also obligate the agent to make his job the best he can, with honestly, integrity. In return insurer is able to provide the agent benefits, such as  :

• Dotation of maintaining office
• Pension
• Family Founding

Difference between captive agent, independent agent and broker

The captive agent can be opposed to independent agent, who works on his/her own and can offer products of multiple companies. The offer of independent agent can be therefore better suited for customers. However, the captive agent usually knows the products better, knows more about them and obtains information's faster. Independent agent is an agent who representative a few insurance companies, estimated, on average, such agent represents about eight companies. It is better solution for the customer as the agent can present few other offers which gave competing quotes. Independent agent is open to the needs of the client, first analyzes the expectations then offers the offer most similar to his preferences. In contract to captive agent he needs to pay all expenses of leading business by himself. These agents can place your coverage with any of the insurance companies which he/she work with as long as the customers meets the standers of the company . Broker on the opposites of the agents are working not for insurance company but for the Customer. They represent the client, not the insurer. They can make better research of the market to help meet needs of the Customer. Broker is an intermediary citations for multiple insurers can assist the client .

Improving qualifications

To improve qualifications and credibility many agents is using professional courses which let them permission to use designations on their marketing materials. In USA One of the most popular courses for an agents is CPCU, Chartered Property Casualty Underwriter. It means that the agent has finished positively professional courses and passed national exam. In this profession it is very important to constantly improve skills and qualifications to meet the expectations of customers.

Advantages of cooperation with captive agent

There are a lot of prons of buying from captive agents. They are very knowledgeable about their companie's long-term goods and are capable of making predictions about characteristics that would suit you and your needs most. They are also able to foresee your risk of declination. What is more, this kind of agent possibly knows you very well. Client always knows to which agent should call when having a bump or simply wants to change his or her life insurance. Agents are actively educated and know their product very well. No agent for whom his or her job is important will risk your trust by lacking education presentation. Moreover, agent shall make sure that the client knows the products and is familiar with them so they both have chance to learn something more. Another advantage is that if buyer will decide to purchase the product then is aware that the agent stand behind his or her choice .

Examples of Captive agent

• State Farm Insurance Agent: State Farm is an example of a captive agent. State Farm agents are independent contractors, who are responsible for selling and servicing State Farm products. They must pass licensing exams and annual continuing education courses to remain in good standing.
• Allstate Insurance Agent: Allstate Agents are independent contractors who act as sales representatives for Allstate products and services. They must pass licensing exams and annual continuing education courses to remain in good standing.
• Farmers Insurance Agent: Farmers Insurance agents are independent contractors who are responsible for selling and servicing Farmers Insurance products. They must pass licensing exams and annual continuing education courses to remain in good standing.
• Liberty Mutual Insurance Agent: Liberty Mutual Agents are independent contractors who act as sales representatives for Liberty Mutual products and services. They must pass licensing exams and annual continuing education courses to remain in good standing.
• American Family Insurance Agent: American Family Insurance agents are independent contractors who act as sales representatives for American Family Insurance products and services. They must pass licensing exams and annual continuing education courses to remain in good standing.

Limitations of Captive agent

A Captive Agent can have several limitations, including:

• Limited product offerings: Captive agents are limited to the products their company offers, so they may not have access to other products or carriers that would be a better fit for their clients' needs.
• Lack of independence: Captive agents are not independent, so they may be more inclined to sell a product that is offered by their company, regardless of whether it is the best choice for the client.
• Higher costs: Captive agents typically charge higher fees and commissions than independent agents, which may make their services more expensive for the customer.
• Fewer discounts: Captive agents often have limited access to discounts and may not be able to find the best deals for their clients.

Other approaches related to Captive agent

One approach related to Captive agent is to use other alternatives like:

• Independent Agent, who works with multiple insurance companies and can provide a wider range of coverage;
• Direct writer, which is an insurance company employee who works exclusively for one company and operates through direct channels such as the internet or phone;
• Broker, who is a third-party agent who works with multiple carriers to find the best rate and coverage options for a customer;
• Exclusive Agent, who works in an exclusive agreement with one insurance company and can only offer the products of that company.

Overall, Captive agents are agents that are directly employed by a single insurance company, while other alternatives like Independent agents, Direct writers, Brokers, and Exclusive agents provide more flexibility in terms of coverage options and rates for customers.

Footnotes

Captive agent — recommended articles

Direct writer — Placement fee — Turnkey business — Nonadmitted insurer — Mercantile agent — Commercial agent — Unsought good — Commercial mortgage broker — Special offering

References

• Bloch, F., Dutta, B., Robin, S., & Zhu, M. (2017). The formation of partnerships in social networks
• Dearborn Financial Institute, (2003) Principles and Consumer Protection: Ethics for Property & Casualty Professionals
• Gitman L. J., Joehnk M. D, Billingsley R., (2010) Personal Financial planning, South-Western College Pub
• Lipson B., (2002), J.K. Lasser's Choosing the Right Long-Term Care Insurance, Wiley
• Perkins S.,(2014) Talent is Not Enough: Business Secrets for Designers, New Riders

Author: Dominika Król