Captive vs. Independent (Non-Captive)
Life Insurance Agents

Life insurance is typically sold through agents. There are two types of distribution models: captive and independent agents. There’s no right or wrong approach as both models have advantages and unique challenges. It’s important to understand the two models when deciding the most appropriate fit for you.

What is a captive agent?

A captive agent is an agent that generally represents a single life insurance company. Products and services are limited to the products of the represented carrier. Some examples of life insurance companies with large, captive agent field forces include Northwestern Mutual and New York Life.

Pros of a captive agent

• Limited product set allows you to develop deep expertise in the offerings
• A single set of carrier rules and procedures to navigate
• Greater familiarity with forms and processes makes doing business easier
• High brand recognition due to extensive advertising of carrier
• Systems designed specifically for sales and service of the products you offer
• Carriers committed to the market (although MetLife’s breakup was evidence that any carrier can change course)
• May have employment benefits like access to health care, deferred compensation arrangements, etc.

Cons of a captive agent

• Limited products choice restricts client options
• Inability to match client with the best available underwriting program or standards for a client’s unique risk profile
• Stuck with the systems that the carrier provides whether or not they’re antiquated
• Not conducive to serving clients with policies from multiple companies
• Client perception of carrier may taint their perception of you
• May restrict growth opportunities
• Leaving to become independent means you lose your renewal income

What is an independent agent?

An independent agent is an agent that represents multiple carriers’ products and services. Access to carriers may be through a direct contract to a company, but it is most commonly achieved through some type of insurance marketing organization (IMO) that pools agent production to meet minimum contract standards, achieve higher commission payouts, or negotiate special support arrangements.

Pros of an independent agent

• Choice of the carriers and products you want to represent
• Access to any generally available product a client may want/need
• Ability to match client underwriting risk profile with carrier niches or processes
• Opportunity to leverage underwriting competition for a better client outcome
• Perception of less biased representation than a captive agent
• Opportunity for higher commission payouts
• Ability to enter new markets
• Option to choose systems and procedures that best fit your needs
• You’re the boss…for better or for worse

Cons of an independent agent

• Huge administrative burden and complexity of managing multi-carrier environment of forms, procedures, and regulations
• Less brand recognition of some carriers you may represent
• Client service becomes much more challenging with disparate capabilities across carriers including client portals, agent portals, and general service capabilities
• Impractical to have deep expertise in all products and services available to you
• Carriers may enter/leave the market creating service challenges
• Selection of IMO may influence product access and systems
• Potential to need to meet certain production requirements with carriers (although this is often overcome through the IMO pooling)
• Frequent product changes creates challenges in staying on top of current offerings

How to transition from captive to independent?

The first step is to really analyze if becoming independent is right for you. You’ll have to stomach the loss of renewal commissions and rebuild a book of business. You’ll also want to examine any potential provisions in your contract that might restrict your activities for a period of time. The next step is to vet options for access to the carriers and products you want to represent. There are tons of IMOs and producer groups across the country. Find one that offers you the support and systems you need to be successful. It’s not simply about finding the highest payout. Can you get marketing support? What’s the compliance area like if you offer products through a broker dealer? Do they have advanced sales support? What do they have in place to support underwriting? What carriers/product will you have access to through the IMO?

You’ll likely need to reinvent yourself from a brand perspective: new website, new LLC, new messaging, new offerings. You’ll need to think through how you explain the change to your centers of influence and old client base. Then you and your staff will need to learn the new products, systems, and processes…all while seeking out new client opportunities. What service expectations do you want to set for clients? Will it be a streamlined process that offers a competitive advantage or a labor intensive process that becomes a heavy expense burden?

You need to have a plan and a process to accomplish this. Blindly flailing through each step is not a recipe for success. More thorough due diligence front and development of a plan will go a long ways towards setting you up for success. As the old saying goes, every journey starts with a single step.

Systems will become critical for you. What CRM do you choose? What about integrations with other systems? What email system? Archiving for compliance? File sharing. Security. Phone and video conferencing capabilities are crucial in today’s environment too. Don’t just focus on the front end. You need to think through how you service your clients too.

How Proformex helps independent agents

Proformex is designed with the challenges of independent agents in mind. It makes your life easier, but it also makes it easier for your clients to understand their policies. Some of the benefits of Proformex include:

• Reduce costs by automating back-office administrative tasks
• Automatically order inforce illustrations from carriers
• Identify problem policies quickly and easily
• Examine existing book of business for opportunities such as term conversions or life settlements
• Professional client service reports
• Common reporting format regardless of product or carrier makes it easy for you, your staff and your clients to navigate discussions on inforce policies
• Data feeds from some carriers can help streamline your processes
• Secure vault provides access to important documents and statements
• Admin platform not tied to a specific IMO or carrier
• Reduces the need to navigate multiple, confusing carrier websites with inconsistent capabilities

Your choices matter

Becoming an independent agent can be daunting. However, with the right partner choices, solid systems with an eye on the future, and a sound plan, you can set yourself up for a successful transition that benefits you and your clients.