The True Cost of Being A Captive Insurance Agent

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.

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.  

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.

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.

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.

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.