Choices. That is the primary difference between working with an independent/broker agent and a captive/exclusive agent. In the former you can choose between various carriers and options for your insurance. On the other hand, when working with an exclusive agent, you are limited to one carrier’s insurance policy options and rates.
Typically, an insurance broker is operated by a licensed insurance agent that works with multiple carriers and with multiple options to select from. A “captive” or “exclusive” agent typically is an insurance agent that works for one carrier and only sells that carrier’s policies. In other words, when you think “broker” think agent that sells various carriers and when you think exclusive agent think national brands like Allstate, State Farm, Farmers, AAA, etc.
Before we get into the pros and cons, let’s first clear up some of the common terminology you’ll run into when trying to assess the various types of insurance companies you can work with.
- Insurance Broker: A company or individual that is appointed to sell insurance through numerous insurance carriers or companies.
- Independent Agents: Another term for an insurance broker, independent agents sell insurance on behalf of multiple insurance carriers.
- Insurance Carrier: Very simply, this is any insurance company that offers insurance policies to the public.
- Licensed Agent: An individual that can legally sell insurance to the public.
- “Captive” or Exclusive Agents: Insurance agents that only sell insurance from the carrier they work for.
- Producer: Another term for a licensed agent, producers can sell insurance policies to the public.
The Benefits of Working with An Independent Insurance Broker
While insurance carriers are responsible for setting their policy guidelines and associated rates, there are few benefits to working directly with a carrier vs. an insurance broker. In fact, insurance brokerages and independent agents offer a variety of benefits over captive agents.
- Expertise: Having worked with many different carriers, brokers are able to understand the pros and cons of each carrier for your particular situation and needs.
- Translating Lingo: Each insurance carrier has its own set of terms, lingo and rules they use, making it hard for the average consumer to navigate this technical language and legal jargon. Brokers serve as a sort of translator to help you understand what each carrier is saying.
- Personalized Experience: Brokers take the time to understand your needs and can personalize the insurance buying experience accordingly. Carriers only sell one product and therefor the experience is pretty standard for all customers.
- Specialized Policies: When you can shop multiple carriers, you have more options to find the best fit for specialized situations. Each carrier assesses risk differently and brokers can shop various companies to find policies that fit your unique circumstances.
- Save Time: If you are getting quotes from various captive (aka exclusive) agents, then that means you would have to contact different agents and supply your information multiple times as you shop insurance policies. When working with an independent agent, they do all this shopping for you, saving you time while also finding you the best possible coverage and rate possible.
- Incentives: In many cases, captive agents are incentivized to sell even if the policy they offer isn’t the best possible option for the consumer. Similarly, the typical exclusive agent can only help 5-10% of the prospects they quote. Independent agents on the other hand are less concerned with what policy they sell, and because they are not biased in that way, they are more focused on doing what’s right for the client. This means they are able to serve the needs and interests of their clients better.
- Renewal Savings: When buying insurance from a captive agent, you are subject to the policy changes of that company. If rates go up, there is really nothing you can do about it, except go through the time-consuming process of shopping policies on your own. However, when working with an independent agent, they will do this work for you automatically at renewal to make sure you’re getting the best possible coverage at the lowest rate.
Requirements for Licensed Agents in Michigan
Beyond the difference between carriers and agencies, every insurance agent must be licensed in her or his state. Each state has its own unique set of rules and regulations when it comes to becoming a licensed insurance agent. Here is a quick snapshot of what is required to become a licensed agent in Michigan:
- Fingerprinting Required: No, but applicants must provide two forms of identification at exam
- Number of Hours of pre-Exam Training Required: 24 hours each for life; accident and health; property; casualty; personal lines
- Exam Passage Required Before Applying for License: Yes
If you’re currently working with a captive agent directly and would like to learn more about the agency/broker experience, you can get a free quote to see if there are opportunities for you to save by switching. As mentioned in the article above, our interest at Entrust Insurance is to offer you the best coverage for your situation at the lowest rate possible. We aren’t concerned with which policy we sell, just that you are taken care of and protect