What is an Independent Agent?
An independent agent is an insurance professional who doesn’t work for any specific insurance provider, but instead has been approved by select providers to offer their products and bind their policies.
How independent insurance agents work
Independent agents work for themselves or for an independent insurance agency. They make their living on commission.
While the independent agent isn’t employed by an insurance provider, they work with providers to gain approval from them. That might require the agent to take a specific training or prove a substantial sales pipeline, for example. Once they’ve met the insurer’s requirements for approval, the independent agent gets permission to sell that company’s insurance products, which includes binding coverage for policies they sell.
The insurance provider then pays the independent agent a commission based on the dollar amount of that company’s products sold.
All of this functions slightly differently than other types of insurance professionals.
Different types of insurance professionals
Independent vs. captive agents
You can compare independent agents against captive agents. The latter works with one specific insurance company and is only able to provide prospective clients with options from that insurer.
Independent agents benefit from the opportunity to gain approval from several different insurance companies, broadening the options they can present to clients. But captive agents generally benefit from more sales training and marketing support from the insurer to which they’re committed.
Agents vs. brokers
Independent agents aren’t the only insurance professionals who can show you options from multiple insurers, though. You can also work with an insurance broker, who doesn’t have approval from any specific insurance companies.
That means that brokers can shop the marketplace at large, rather than the select companies with which they’re approved. But it also means they’re unable to bind coverage for you. In other words, when you find a policy with a broker, they’ll have to refer you to an agent to get the policy in force. Independent agents, on the other hand, can make your coverage effective (i.e., bind coverage) themselves because they have insurer approval.
Money and time savings with an independent agent
When it comes to insurance shopping, comparing policies from different insurance providers is one of the best ways to make sure you’re getting the best price. But gathering quotes yourself can require a lot of time and energy.
That’s where independent agents (and brokers) come in. With this option, an insurance pro does the legwork for you, then presents you with all of your options. All you need to do is provide the agent with your details (age, address), and they can compile quotes for you.
What’s more, some insurers only offer their policies through an agent, which means the agent might present you with choices you wouldn’t be able to find yourself.
Ultimately, working with an independent agent can help you compare policies and get the most affordable one without eating up too much of your free time. But before you start working with one, there are a few things to keep in mind.
Things to know about independent insurance agents
There are a couple of caveats with independent insurance agents.
For starters, while they’ll give you a broader array of options than a captive agent, they can’t provide you with a comprehensive look at the marketplace. Independent agents only offer policies from insurers with whom they’ve been approved. The best, cheapest policy could be with a company that hasn’t greenlit them, and you could miss out.
Secondly, some insurers pay a higher commission or offer more incentives than others. That could motivate some less-than-scrupulous independent agents to offer one policy over another, even if it isn’t necessarily the best option for you.
All this said, an independent insurance agent can still be a great resource when you’re insurance shopping. Just make sure you do a little digging yourself, too.