Captive Agent (Insurance) - Explained
What is a Captive Agent?
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What is a Captive Agent?
A licensed insurance agent who works for one single insurance company exclusively, is known as a captive agent. A captive agent represents one single insurance company and sells only the products offered by that company. A captive agent may be a full-time employee of the company or an independent contractor. The full-time employees get a fixed salary plus commission while the independent contractors earn on a commission basis. Captive agents do have thorough knowledge about all the offerings of their own company but are unable to serve those who do not need or qualify for the products of the company.
What Does a Captive Agent Do?
Many big and well-known insurance companies employ captive agents who sell their insurance policies exclusively. Nationwide, State Farm, Allstate, and many other companies have their captive agents. Captive agents are experts in their company's policy with detailed knowledge. They do not have to learn about the rules and products of different insurance policies offered by different companies. They can easily suggest the products offered by their company according to your need. They can easily calculate the price for coverage after knowing a few details. Common insurance products include car, house, mobile, home-rent, motorcycle, boat, commercial and health. Annuities, investment funds, retirement plans, business life etc. are some of the common financial products.
Captive Agents and Independent Agents
There are mainly two types of licensed agents work for the insurance companies; captive agents and independent agents. Captive agents enter into an agreement with a single insurance company to sell their products only. Whereas independent agents are allowed to sell policies offered by multiple insurance agencies. They have a contract with more than one insurance companies and sell specific lines of insurance policies offered by those companies. Captive agents enjoy certain benefits against the contract including a fixed salary, office space to work from and direct access to the administration of the company for speedy paperwork. When a customer approaches the company for a policy, the insurance company generally refer them to their captive agents working in that area. On the other hand, independent agents do not get such supports and referrals from the insurance company. They have to work from their own office, and they depend on the commission for earning. However, they are able to offer their clients a varied range of policies offered by different insurance companies to choose from. Their clients can pick up the most suitable one according to their need and eligibility. But in general, independent agents do not get a chance to sell the policies offered by the companies who have their own captive agents. Those companies often exclusively rely on their own agents for selling their products. Generally, independent insurance agents earn a much higher percentage of the sales and their commission rate is often 50% higher than the captive agents. But at the same time, they need to run their own business without any support from the company. The commission rate is often much lower for the captive agents but in addition to the commission, they get other supports including monthly salary, operational expense etc. The earning of the captive agents is generally more consistent and stable than independent agents. Independent agents often team up with other independent agents to form an agency and run its operations jointly.
Advantages of operating as a captive agent
Captive agents need to learn and memorize the rules, products, and guidelines of one single company. They do not have to gather knowledge about different policies offered by multiple agencies. Usually, insurance companies provide handholding support for setting up captive agencies. They offer training and all other required supports to its captive agents and agencies, Captive agents are not required to advertise their products and offerings. The insurance company takes all the responsibilities of marketing and advertising. Usually, the captive agents sell the products of some nationally recognized brands, so the agents do to need to worry about the advertisement and promotion. Captive agents generally get a monthly salary and other benefits from the company in addition to the sales commission thus they have a more consistent earning. Captive agents have direct access to the companys administration thus they can get the paper works done more efficiently and quickly.
Disadvantages of operating as a captive agent
Captive agents have only one product to sell. They cannot offer different options to their clients. Even when they know the product is not best suited for their client, they need to convince the client to buy that insurance plan. If the company stops offering a certain line of insurance, the captive agent of that company needs to stop offering that policy. The captive agents often need to push certain policies which are not in the best interest of their clients. The responsibility of the captive agent is to promote and sell the products of their parent company and build a business for it. When the agent wants to retire from work, he or she is not free to perpetuate the agency to whomever they wish.
- What is insurance?
- Captive Agent
- Independent Agent
- Captive Insurance Company
- Combined Ratio
- Claims Adjuster
- Capital at Risk
- Assigned Risk
- Incurred But Not Reported
- Qualified Actuary
- Cession (Re-Insurance)
- Burning Cost Ratio
- What is an insurance contract?
- Accidental Means
- Anti-stacking Provisions
- What is an insurable interest?
- What are the common categorizations of insurance?
- National Association of Insurance Commissioners
- Insurance Regulatory Information System
- American Academy of Actuaries Definition
- American Association of Insurance Services Definition
- American Council of Life Insurance Definition
- American Insurance Association Definition
- American Risk and Insurance Association Definition
- LLoyd's of London
- Associate in Insurance Services (AIS) Definition
- Associate in Loss Control Management Definition
- Associate in Marine Insurance Management Definition
- Associate in Personal Insurance Definition
- Associate in Reinsurance (ARe) Definition
- Associate in Risk Management Definition
- Associate in Commercial Underwriting Definition
- Associate in Insurance Accounting and Finance Definition
- Associate in Surplus Lines Insurance Definition
- Chartered Insurance Professional Definition
- Chartered Life Underwriter Definition
- Chartered Property Casualty Underwriter Definition
- Vehicle insurancePrivate Passenger Auto Insurance Risk Profile
- Underinsured Motorist Coverage
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- Omnibus Clause
- Health Maintenance Organization
- Capitated Contract
- Point of Service Plan
- Children's Health Insurance Program
- Disability Insurance?
- Credit Disability Insurance
- Life Insurance?
- Cash Surrender Value
- Absolute Beneficiary
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- Charitable Gift Life Insurance
- Incontestability Clause
- Waterfall Concept
- Assumed Interest Rate
- Clean Sheeting
- Hazard Insurance
- Homeowners, Renters, and Fire Insurance?
- Participating Community (Flood Insurance)
- Insurance Considerations for Business
- Business Liability Insurance
- Commercial General Liability
- Liability Risk Retention Act
- Excess Insurance and Umbrella Insurance Policy
- Business Interruption Insurance
- Key Person Insurance Definition
- Own-Occupation Policy
- Self-Funded Health Insurance Plan
- Basket Retention Policy
- Commercial Blanket Bond
- Alternative Risk Transfer Market Definition
- Commercial Property Casualty Market Index Survey
- What are the primary obligations of the insurer?
- Earned Premium
- Reservation of Rights Letter
- Collateral Source Rule
- What are the primary obligations of the insured?
- Insurance Premium
- Affidavit of Loss
- What is the general structure of an insurance contract?
- Ambiguity Principle
- Accommodation Line
- What are the common disputed provisions in an insurance contract?
- Absolute Exclusion
- All Risks Clause
- What is required for the termination of an insurance contract?
- Risk Management
- Professional Risk Manager
- Associate in Management (AIM)
- Financial Risk Manager
- Forecasting (Business)
- Objective Probability
- Unconditional Probability
- Enterprise Risk Management (ERM)
- Operational Risk
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- Political Risk
- Asset Protection
- Performance Bond
- Barra Risk Factor Analysis Definition
- Above Ground Risk (Mining Industry)
- Bumbershoot Policy (Maritime)
- Abandonment Clause (Boat or Vessel)
- Bobtail Liability Insurance (Trucking Industry)
- Anti-Indemnity Statute (Construction)