October 1

The True Cost of Being A Captive Insurance Agent

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In the world of insurance professionals, you can be either a captive agent or an independent agent. Captive agents do not own their book of business, while independent agents own their book of business. It is time to increase your income and return on investment.


What Are You Losing For Being A Captive Agent

Being a captive agent comes with a few advantages. Parent insurance companies or agencies often offer their captive agents financial support, usually by way of allowances, employee benefits, and funds for overhead expenses. They provide guidance and resources, including product training, promotional campaigns, and even leads or client referrals. But, being a captive agent also means missing out on a lot of perks that independent agents enjoy.

Independent insurance agents contract with various companies, selling diverse lines of insurance coverage on a non-exclusive basis. They can cross-sell into other lines of insurance, making them a great option for clients seeking different types of coverage. They also generally get a higher percentage of commission than captive agents do.  

They may not gain guidance or support from their insurance carriers, but independent agents can partner with an insurance field marketing organization (FMO/IMO) to get the push they need to succeed in the industry. Most FMO/IMOs offer non-captive agents high-level, direct contracts with various insurance carriers in the country.  The agents receive their commission directly from the insurance carriers, but FMO/IMOs have skin in the game, too. They won’t get paid by the insurance companies unless their agents sell policies. As such, they can provide agents training and support to help them close deals and reach their goals.  

With FMO/IMOs helping them close more deals, independent agents gain a lot of advantages over captive agents:
Is It Time To Move From Being A Captive Insurance Agent to An Independent Insurance Agent

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Higher Earnings

Most FMO/IMOs do not charge agents fees for training, support, and other services. As mentioned, they receive payment directly from the insurance carriers, so independent agents get full commissions. As such, these agents often have higher earnings than their captive counterparts. To illustrate the gap in their earnings, here is a sample of how independent and captive agents earn:

Say, you are a captive agent looking for ten leads per week. Captive companies usually charge their agents for leads but will give them discounts and make sure they get those leads to purchase insurance. But, here’s the thing: even if you get qualified leads, you won’t earn much because commission levels in captive organizations are often low.

For example, you sell a policy worth $50 per month (the industry average), and you are on 70% commission contract (it could be lower as captive companies offer different commission levels). In a year, your client pays $600 ($50 x 12 months) for the policy. Let’s get 70 percent from that amount, and we see that your commission for the first year for that single policy is $420.

Now, if you were on a 110% contract with an insurance carrier as an independent agent, then you would have made $660 in a year for the same policy. That’s $240 more than what you would have earned as a captive agent.

Perhaps, you’d argue that independent agents spend more on leads than captive agents do. Say, you are a non-captive agent who uses your own lead program that costs you $450 per 1000 prospects and gives you an average return of about one percent. That’s ten qualified leads for a price of $450.

Let’s further increase your lead cost. Say, you have to purchase 2000 leads to get ten qualified ones. That would cost you $900 to talk to ten clients. Now, if you sell $50 policies to the five of them at a 110 percent commission level, you would make $3300. Deduct the lead expenses ($900) from that amount, and you would still earn $2,400 per year from five policies you sold.

As a captive agent, you probably spend $20 per lead. So, that’s $200 for ten qualified leads. By average, you closed five clients, who each purchased $50 policy. Let’s do the math: $50 x 12 months x five clients = $3000. Take 70 percent of that amount to get your commission, and you would get $2100. Then, deduct the lead cost of $200, and you would have a net gain of $1,900 — which is $500 less than what you would have earned as an independent insurance agent. This is just in the first year, not including higher renewals on the independent insurance agent side.


Pro Tip: Remember, at the end of the day, being a captive agent means low contract or commission level, which can pull down any savings you may have made buying less expensive leads. Lower lead cost doesn’t necessarily give you higher returns.

A Variety of Quality Products

Another thing you miss as a captive agent is selling multiple quality insurance products. Since independent agents work with many insurance carriers, they get to offer their clients different policy options. They can also provide price comparisons and competitive quotes of similar policies. In turn, they help their clients choose the most suitable insurance products for any underwriting conditions they might have and save money. Insurance carriers don’t always accept the same type of client conditions, this is another perk of offering a variety of product offerings.

Plus, when you partner with an FMO/IMO, you are assured that you sell only quality products. FMO/IMOs function as a filter; they screen carriers and their products to make sure your clients won’t feel like they got ripped off.

Here at TR King Insurance Marketing, for instance, we offer contracts for various types of insurance, such as Traditional Life, Final Expense, Medicare Supplement, and Medicare Advantage insurance. We work with the nation’s leading insurance carriers to make sure you offer only the best to your clients.


Pro Tip: Offering various types of products and options is a huge advantage in the industry. This is especially true if you have clients who meticulously shop for policies before making a purchase or seek different insurance products for each member of their family. When you’re a captive agent with limited products, there is a chance you will fail to close a deal with those kinds of insurance buyers.

Policy Quote Engines

Apart from having limited products, working as a captive agent means you don’t get to evaluate policies objectively. You are only allowed to sell products that your company provides. And if it doesn’t provide a quote engine that compares its price against other carriers, your clients might feel that what you offer isn’t the best fit for their financial and life plans.

On the other hand, independent agents help customers narrow their options down, thanks to online quote engines from FMO/IMOs. On average, these agents sell for five to eight different insurance companies. But with one click, they can present comprehensive price comparisons to help their customers make a more informed decision. Plus, since they represent multiple providers, non-captive agents provide unbiased advice, which many insurance buyers highly appreciate.

Quote engines from independent agents also make insurance shopping more convenient for customers. They no longer need to spend time filling out multiple requests to get multiple policy quote comparisons.


Pro Tip: Objective, convenient, and comprehensive price quotes are a great factor in insurance shopping. As such, many insurance buyers find working with independent agents a better, wiser option than dealing with captive agents.

Advanced Training & Support

As mentioned, independent agents can receive training from FMO/IMOs. Training programs are often extensive to help agents advance their knowledge on multiple policy types and products. And agents have the freedom to choose sessions that best suit their needs. For instance, they can select a Final Expense insurance training program if they want to improve their prospecting or closing skills for the senior market.

Also, working with an FMO/IMO ensures that you have up-to-date product information and the latest news in the insurance business. FMO/IMOs can also help agents get certified or renew their certifications. In turn, you gain adequate training and resources to stay competitive in the industry.

As a captive agent, on the other hand, you miss the opportunity to deepen and broaden your industry knowledge. After all, you only need to learn about the products that your carrier offers. This limited knowledge does nothing but hinder the progress of your career.

When it comes to receiving support, independent agents don’t fall behind. We can’t speak for all FMO/IMOs, but here at TR King, we provide live chats and rapid response to emails and phone calls to make sure you get the assistance you need while you’re in the field. We also provide marketing materials and tools that help you deliver excellent service to your clients.


Pro Tip: Training leads to knowledge which builds confidence translating into sales. 

Freedom to Grow Your Insurance Business

As a captive agent, you have a stable source of income (but might be lower than independent agents make, as discussed in #1) from your parent company. But there’s a downside: if your company discontinues selling certain products or increases the rates on specific types of insurance, you might find yourself losing a lot of clients. In a way, when you work as a captive agent, your clients are not your clients — they are your company’s.

Also, captive companies often push certain insurance products over others and oblige their agents to meet sales quotas. With these demands, it can be difficult to establish good relationships with clients and to sell policies objectively. You might find yourself focusing more on your monthly billings than helping your clients achieve their goals, which many insurance shoppers find off-putting.

On the flip side, being independent of all carriers means you have an objective eye to assess different policies. Plus, you don’t have to go by strict company protocols to quickly help your clients — from obtaining access to various policy rates and completing insurance applications to getting claims. You have complete control over how you want to run your business.

In addition, independent agents who partner with an FMO/IMO get expedited contracting. At TR King Insurance Marketing, for instance, we cut down process time and reduce amounts of paperwork by letting our agents use contracting software online. As such, you have more time on your hands to focus and grow your business.

Reading all these things that you miss as a captive insurance agent, you’re probably thinking of going independent. But, this move will be easy with the helping hand of an FMO/IMO.


Pro Tip: Prepare to obtain a release from your previous upline. If that is an issue, with most companies you can wait six months with no new business to be self-released.

Switching from Captive to an Independent Insurance Agent

The biggest challenge of transitioning from being a captive agent to an independent agent is building your business from scratch. You have to give up your existing clients because they belong to your parent company, after all. Sure, some clients may jump to you after your lockdown period (if you have a non-compete agreement with your captive organization). But, you can’t wait for these clients before you get on with the new chapter of your insurance career.

One thing you can do to address your biggest challenge is to partner with an FMO/IMO like us. We will help you hit the ground running with our lead generation resources, excellent training, and top-notch support. Our organization will also give you the tools you need to cross-sell supplemental insurance products to increase your earnings.

Also, we provide accessible quote engines and convenient contracting. We do a huge chunk of your work, so you have more time to prospect more clients and serve them the way you want. Having complete control of your business means you can provide better, quicker, and more convenient service to clients. As such, you can establish and nurture greater customer relationship, which is a huge help as you build your independent insurance business.

Many new independent agents get frustrated with not being able to contract with major insurance carriers because their new book isn’t big enough. But that won’t happen when you partner with us. We serve as a middleman to get you top-level contracts with the country’s leading insurance carriers. As such, you will get higher commissions which you can use to stabilize your business and even expand it.

Trust us to get you back in the field equipped with the knowledge, training, and skills you need to dominate it. We have helped many independent agents over the years; it’s time we lend you a hand to take complete control of growing your insurance business.

Interested with starting an independent insurance business or switching from being captive to an independent agent? Give us a call or contract with us today to get started.

Key Takeaways In This Article

  • If you are self-driven, motivated, highly displicine, have an entrepreneur spirit, and enjoy the thought of unlimited income then being an independent agent is right for you.
  • If you aren't self-driven, need supervision, a structured schedule, and do not have the ambition to build your own business, then maybe captive is the answer for you.
  • Be honest with who you are and you will know which route is right for you. 

Over to You

We'd love to hear your thoughts in the comments below on:

  1. How do you feel about the above article?
  2. What was your experience going captive to independent or vise versa, why did you?
  3. Do you know which type of agent you are, what's your reasoning?

If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!

About the author 

Matthew King

Matthew King is a co-owner of TR King Insurance Marketing. When he's not creating processes, content, developing training, and implementing digital marketing strategies, he likes to immerse in gaming with his wife and friends.

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