by Ed Sneneh
Specialist in Auto SR22 Insurance Chicago Illinois

An Independent Insurance Agent is a licensed insurance professional or entity who represents a number of insurance carriers and Managing General Agents (MGA) for the purpose of marketing their insurance policies to others. The Independent Insurance Agent represents the customer, not the insurance company or the MGA. Independent Insurance Agents make their earnings from commission earned from insurers and MGAs as well as fees collected from their clients. Depending on the amount of business and their size, Independent Agents may represent several insurers and MGAs, but may focus of few of them.

An independent agent is not governed by the procedures or policies of any insurance company, something that frees them from strict underwriting guidelines of certain insurers. The ability to provide prices and policy offerings from multiple carriers give the independent agent an enormous power to compete against other agents, especially the captive agents (non independent.)  However, becoming a professional independent agent requires extensive experience and training, more financial resources to run and manage the business, and will require total reliance on commission only as a sources of income.

A Captive Insurance Agent, on the other hand, is one who works either strictly or primarily for one insurance company. The agent represents the company, not the customer. The agent relies on a combination of salary and commission for earnings.

A captive insurance agent is government by the underwriting guidelines and rules of the company employing them. Their ability to compete with other agents relies on the competitiveness of their employing company, which can be limited in certain instances. Captive agents get lots of marketing and management support from their employing carriers. The ability to start a career in the insurance business is easier as a captive agent because less financial resources and product knowledge/ experience are needed.

Main Challenges Facing Independent and Captive Insurance Agents

How to get appointment with insurance companies to sell property and casualty insurance is probably the main challenge facing independent agents. Not many insurers are willing to appoint property and casualty agents, especially the new ones, or the agents that lack the experience. Securing Errors and Omission insurance for new property and casualty agent is another challenge. Capital and managerial requirements may be beyond the capabilities of new agents.

For captive agents, the challenge is to maintain focus on meeting the requirements for their company as far as working within the specific niche of that company, learning the products of that company and trying to locate certain customers that meet the specific requirements of that company. A captive agent who works for one company may find himself/ herself in serious turmoil of his company decides to take sharp raise in their premiums or change their appetite for certain risk. Some captive agents may find themselves alone, with no book of business, if they do not comply strictly with the guidelines of their company, or if they do not change their business appetite to suit the appetite of their company. 

Potential Earnings For Insurance Agents

According to the US Department of Labor " The median annual wages of wage and salary insurance sales agents were $45,430 in May 2008. The middle 50 percent earned between $33,070 and $68,730. The lowest 10 percent had earnings of $26,120 or less, while the highest 10 percent earned more than $113,930." In reality, the earnings depend on the line of business. Generally speaking life insurance sales agents make more money auto insurance agents. Also experienced agents make more than new comers.


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