Captive Agent

A captive agent is an insurance agent who only works for one insurance company. A captive agent is paid by that one company, either with a combination of salary and commissions or with just commissions. He or she may be a full-time employee or an independent contractor. Captive agents have in-depth knowledge of their particular company's insurance products, but cannot help a client who does not need or does not qualify for that company's products. The parent company may push its captive agents to sell certain policies or meet certain sales quotas.

The opposite of a captive agent is an independent agent. An independent agent does not work for any particular insurance company and is often paid by commission only. Independent agents can sell policies from an array of companies. This arrangement can be better for clients because the agent can seek out the best policy for that client's needs. However, an independent agent may not have specialized knowledge about a particular company's products. An independent agent arrangement can be better for agents because it offers a more diversified source of income, but it can also be riskier because the agent may need to provide his or her own startup capital, pay for business expenses and arrange benefits.

Captive agents often excel at providing an exceptional level of service to their clients. This is so because they have the freedom to spend more time on relationship building, fact-finding and customer service – and in an increasingly digitized insurance marketplace, those are the types of things clients increasingly aren't getting.

The main reason an insurance agent would prefer to work as a captive agent is financial. Their company usually provides an office, administrative staff to process paperwork, ongoing training, significant bonus and other motivational programs...not to mention a significant national advertising budget. When consumers respond to advertising, the company directs them to a captive sales agent in their area. Captive agents typically receive extensive lists of prospects from their insurance company. Although some exclusive agents earn a salary, most are independent contractors and earn only a commission based on their sales. Exclusive agents usually earn commissions on their renewals as long as they remain contracted insurance company.

Some carriers still impose quotas for selling products, even if they are subpar when compared to competing products on the market. Some compliance departments will also make the mistake by putting too many restrictions on their captive agents instead of freeing them to sell.