All about What is an Independent Insurance Agent
Hey this is Karim from Insurancete. Our Article today is all about What is an Independent Insurance Agent. I get this question all the time”What does that mean?” and all these questions always come up so i thought i’d just resolve that in a quick Article right here. The best way to describe what an independent insurance agent is is to talk about the three ways to get home auto or business insurance and therefore show you what’s available and what the different options are. So the first one is to sign up online or call an 800 number by simply going to your online spaces and getting insurance on your own.
The second is what’s called captive agents and i’ll describe that in a second. The third is an independent agent. So let’s start at the very beginning. You can definitely go online or call an 800 number and get insurance all by yourself. It’s very easy, it’s very quick, and you are on your own in doing so. More and more people are doing that. More and more commercials are being shown for those kinds of companies so that certainly is one way to go about getting your insurance. Some examples of those are companies like Liberty Mutual Insurance or Safe Auto, Basially a lot of the ones you see in commercials are available online or through an 800 number.
The second is through what’s called captive insurance agents. These are folks that usually have a local branch of a large insurance company. The term captive refers to the fact that those folks work for one specific company. They work for the company, therefore they are captive to that company. They can’t go out and look at other companies, other options. If you’re calling them for insurance they’re going to show you what is available with their insurance company. Some common examples of those are State Farm, Allstate, or Farmers.
Generally, those folks have local spaces you can go to if you want to walk in the door of their agency, shake hanks with an actual human, you can do that. As far as how they’re paid (because I get that question a lot, “how are different folks paid for the work they do”) agents of a captive agency are generally paid a salary. They work for the company, they’re paid a salary. They generally get performance bonuses associated with how many folks they bring in the door as well. So that brings us to independent agents. An independent agency is an agency that provides access to multiple insurance companies and advises about which one is best for you. So independent agencies make relationships with multiple companies. They go out to those companies and say “hey you’re a great company we would love to work with you.
Would you like to work with us?” They do that with multiple different companies. It could be two companies, it could be five, it could even be 10 or 20. Different agencies work with different amounts of companies but all independent agencies work with multiple companies. The companies have to know going in that if they’re working with independent agents there’s going to be competition in that agency. In a captive agency there’s no competition. The people work for the company, there’s no other companies there.
In an independent agency there is competition amongst companies inside that agency. Because the agency has multiple companies that they’re working with, the companyies independent agents work with are different than the captive companies. I get the question all the time “Can you offer me State Farm or Allstate or Farmers?” The answer is “No”. I don’t work with those companies because they’ve made a choice. They have chosento have their own agents in towns around the country instead of working with independent agencies.
So companies have to make a decision: Do they want to work with independent agents knowing that there will be competition in the agency or do they want to have their own captive agents in town and just have no competition in the agency? As far as how independent agents are paid, its different as well. Generally speaking independent agents are paid a percentage of your insurance premium. So if you decide to work with them and you pay, let’s say, $1000 for your insurance policy, the insurance agency is going to get some cut of that premium. So in essence and an independent insurance agent is free to you.
The number that is sent to you as the quote, that’s how much your auto, home, or business insurance is going to cost.
That is the bottom line number you’ll be paying. But a little bit of that money comes back to the agency and that’s
how they make their money. To set up a graphic, let’s break down four different parts. Obviously there’s lots of different things to think about when you’re thinking about which insurance company to work with but here are four examples of the difference between these three options. Let’s start with speed. You want to get a quote, you need it right now, you need it quick. Well the best option here’s probably online or 800 number.
The reason is it’s very automated. You’re going to go online. You’re going to plug some information and they’re gonna pop a number out and if you like it, you’re just gonna go for it. So speed generally speaking is going to be better if you work with online or 800 numbers.
As far as local, captive agents and independent agents are generally there locally. So there’s an office you can walk into, shake hands with your agent, sit down and talk about your policies if that’s what you want to do. Ao as far as local goes, captive and independent are your best options.
You’re certainly not going to have that option if you’re working with an online or 800 number company. They’re simply not local and you know that going in. As far as quality and when I’m talking about quality what I’m trying to say is the quality of your insurance policy. That it’s been put together properly. That it’s going to have coverage for you when those bad things happen.
Who’s going to provide you with the best quality policies and the best quality companies. Well, in general, the the access point that has the most options is going to give you the best quality because those independent agents have multiple companies they can look at. One of the things independent agents are constantly looking at is the quality of the policy that the companies are providing. If the company doesn’t have a good quality policy i can move on to another company. I don’t have to stick with that particular company and so I’m more likely as an independent agent to provide you with quality coverage in a quality company.
Alright the last one. Well let me just back up and say the one that’s going to have the least amount of potential quality is going online or to 800 numbers. With a captive or an independent you have people who are looking at your policies and making decisions about what to offer you.
You’re much more likely to see quality from an independent agent and even a captive agent then you are from online or an 800 number where they’re really not paying any attention to what you’re purchasing. You’re making all those decisions on your own without really any advice and so the chances of the quality being low are very high. That’s one of the problems with going online or to an 800 number.
OK, finally price. Now I’m going to come to a conclusion here in just a second but I should preface it by saying no one can say they have the best price. Price depends on so many different things at so many different moments in time. When you decide to look for insurance, that is a single moment in time. Any company may have the best price at that moment, it doesn’t mean that price is going to stay the same.
Companies prices fluctuate year after year. Sometimes going up sometimes (not as often as we’d like it to) going down. In general though, an independent agent is going to know the ebbs and flows of price in the marketplace and be able to offer you a company that is the strongest combination of price and quality at that given moment. More importantly, as time passes, if that company’s price gets worse or goes up, an independent agent is going to be able to say, “you know what. You’re with this company. They’ve taken great care of you.
But their price is not as good as some other companies right now. Here’s another one I can offer. You’ve got a choice. Do you want to stick with that company that you trust and you know or do you want to switch over to this other company and work with them because their prices better?” The great thing is even if you do change, you get to stay with the independent agent. You don’t lose your local personal relationship when you change from one company to another. As a result, what I see when I’m up against independent agents, when i’m looking at someone’s policy that they already have and they’re thinking about coming and working with Shine is that if I’m up against an independent agent i have a harder time showing a much better price then if i’m up against captive agents.
This is because they’re simply not offering you any other options but the single option they have. So they’re not going to tell you necessarily if their price is worse than everyone else. I mean if they’ve got the worst price in town that’s still the only company that they have to work with. So in general for those reasons independent agents tend to to have better price. OK, so “What is an Independent Insurance Agency.
That’s the reason you started watching this video, right? It’s access to multiple, often exclusive, insurance companies inside of one agency. The agency works for you not the company. So the agent is not working for any company, the agent is choosing which companies to work with. Obviously they have a relationship with those companies but they don’t work for the company and that works to your advantage if there’s any issues along the way. Your agent is motivated by quality and good advice.
So i hope you like this Article
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