Being a captive agent was a big deal up to the end of the 20th century. They grew immensely during the tragedies from the 9/11 and Hurricane Andrew with the support from their carriers. However, the agency model for most carriers had a small modification. Carriers went on to break the books of retired agents into smaller chunks to lure fresh agents. It led to many agents joining a captive agency.
Captive agents are now slowly fading away as the industry develops. More and more agents opt to become an independent agent because of the benefits they provide. 89.2% of young agents are independent agents, according to Insurance Journal’s 2018 Young Agents Survey.
You may ask, why are captive agents disappearing from the industry?
Mainly because of the challenges they face in their work. A big challenge captive agents face is they represent a single carrier. Captive agents can only sell the policies that their carriers offer. They are affected by an insurance carrier’s decision about a policy. For instance, if an insurance carrier stops selling a product, the agent must do the same.
Another challenge for captive agents is that they do not have enough growth opportunities. They are limited to the knowledge that their company pass on to them. Unlike captive, independent agents receive lots of resources on product knowledge, training programs, and other resources to adapt to the market. Ultimately, captive agents lose out in those areas.
The technology systems that the captive agents use is a significant problem. Technology is a crucial cause of the growing popularity among the young agents in the independent agency. They use traditional systems. Unlike captive agents, the independent agents are more tech-savvy. Technology helps independent agents to facilitate their work smoothly.
Captive agents have less freedom and flexibility. The clients that you bring in are not yours. The insurance carrier owns the clients. You are just a facilitator between the insurance carrier and the clients. Customers see you as an agent trying to fulfill his monthly target. You cannot manage the clients in the way you want. After you leave the company, the company keeps your book of business. Whereas, the independent agents have more freedom and flexibility. They can offer price comparisons and let the customers choose the product best suited for them. Independent agents handle the clients the way they want.
Profit margin is another challenge faced by captive agents. They usually receive a low commission cut from the insurance carriers. Even though captive agents spend a lot less on lead costs, they may be earning thousands of dollars less than an independent agent. As per the industry average, each sale can make you roughly $200 more as an independent agent.
To sum up, the challenges in the captive side led to the shift towards the independent agency. Since there are more benefits on the independent side, people are drawn towards it. Although there are captive agents in the market, the more successful ones are on the independent side.