The Takeaways:
- Independent insurance agents possess some unique advantages like bringing more options and choices to customers and often with lower premiums.
- Independent insurance agents tend to be more experienced with more industrial knowledge. Other things equal, they may also care more about clients’ welfare.
- Whether independent agents can provide impartial advice or serve clients better depends more on the individual than the group of agents.
- Independent agents should not push for switching providers without taking the switching cost into account.
I have officially declared myself to be an independent insurance agent this month and have been feeling good about it. But this morning it just hit me that I should have asked my favorite AI site of Perplexity.AI about why going independent is good choice not just for me but also my customers.
What the AI Site Says about Independent Agents
I entered this questions:
“What are top reasons insurance consumers should go independent insurance agents?”
Obviously this is a biased question as I only asked for the “pros,” not “cons.” But let’s see what the AI has to say. Below is the answer in its original form and shape:
“Independent insurance agents offer several advantages to insurance consumers. Here are some of the top reasons to go with independent insurance agents:
- More options: Independent insurance agents are not tied to one company, so they can shop around to offer you the best rates. This comparison can result in significant savings.
- Choice: Independent agents represent many different insurance companies that offer a wide variety of coverage options and price points. There’s no need for you to accept one quote from one company, and there’s no need for you to spend time filling out many different online applications to get your own quote comparisons.
- Better customer service: Independent insurance agents are more responsive to their clients’ needs and can offer better customer service than captive agents.
- Impartial advice: Independent agents can provide impartial advice since they are not tied to one company.
- Ability to switch providers and keep the same agent: Independent agents can help you switch providers while keeping the same agent, which can save you time and hassle.
- Tailor-made policies: Independent agents can put together custom-tailored solutions than meet your unique and particular needs.
- Lower premiums: Independent agents can often offer lower premiums than captive agents.
- Knowledgeable: Local independent agents are knowledgeable about the insurance industry and can help you find the right coverage for your needs.
My Overall Evaluation
In my view, the first two advantages, options and choices, are “no brainer” because they are the biggest and most obvious pros for insurance customers. Ask any independent insurance agent and most likely they will proudly tell you the story of better options and choices they can now bring to clients.
Point #7 of lower premiums also holds true most of the time, simply because of more choices than before. In the quote engines many platforms built for independent agents, we can easily see side by side how much premium different products from different carriers will charge, which would be hard to do for the captive agents.
A quick sidenote: “Captive agent” means someone working for a single insurance company or a single insurer or carrier, unlike an independent agent who will write insurance policies for many insurers at the same time.
Point #6 of tailor made policies to the clients is also more possible than a captive agent. When you have more options to choose from, you can compare them and sometimes can even ask carriers to customize the product to fit the customers’ needs and wants better.
So much for the pros and positive evaluations. The following points I feel uncertain with reservations.
Independent Agents & Customer Service
Point #3 that independent insurance agents provide better customer service may or may not be true. In my view, quality of customer service varies more by individuals than by group of agents (i.e., independent versus captive).
Many Independent Agents Are Experienced
Although independent agents may or may not do a better job in serving customers, I must add that they tend to be more experienced or more seasoned. My personal observation tells us that many independent agents started as captives and later after accumulating years or even decades of experience decided to go independent.
This agree with Point #8 that independent agents are more knowledgeable.
There will be exceptions of course. I myself haven’t done decades of insurance for example, although I do have years of teaching financial subjects, which certainly helps. At the risk of self-promotion, I’ve been told by others that I know more than many who have been with the industry for decades. I also know that some of the topics that interest me (e.g., how insurance as a whole makes money) may never interest others, no matter how long they have been in the business.
Having the right amount of curiosity is the key and may be all that you need in this age of AI, which makes the entire world of knowledge accessible to your fingertips.
Independent Agents Care About Customers
Other things equal, I’d say independent agents tend to care more about clients. My reasoning is this: If you take insurance as just another job that pays the bill, whether your clients get the best option they deserve does not really matter — as long as they get their commission. For someone who really cares, being able to offer substantial assistance to satisfy clients’ needs and wants makes a big difference.
I want to use myself as an example. I put three promises on my business cards and flyers:
- Your interest before mine.
- Preach only what I believe.
- Knowledge & insights before sales.
I must be honest that I haven’t seen many agents promising the same.
Independent Agents & Impartial Advice
Although independent agents have access to far more options or choices for customers than captive agents do, it does not automatically mean they are unbiased or impartial.
For one thing, not all products have the same commission or same commission structure. Because everything is transparent on agent portals or platforms, an independent agent can quickly see which option or product has higher commission for them — the information not typically seen by the clients. If they choose to, they can push for only those options that promise higher commission instead of what is the best for the clients.
Switching Products Incurs Cost
Finally, we come to Point #5 that independent agents can help you switch providers while keeping the same agent, which can save you time and hassle. I would be careful about switching providers because it typically comes with an extra cost, such as surrender charge, a cancellation fee and application cost by the new provider, which is typically a flat fee of $50 or 10% of your remaining premiums.
Of course, if you can find a new policy with a premium that makes up for any cancellation fees, it may still be worth it to switch. Another good time to switch is the policy renewal time, when you can normally find a better option by switching. Most if not all Property and Casualty policies are renewed every year (6 month for auto policies), one should take advantage of that to reconsider whether your insurance need has been met.
A permanent life policy may never expire or need to be renewed, while a term life policy will need to be renewed at the end of the term. Health insurance allows one to change provider during the annual enrollment period. Some insurance agents would encourage all potential clients to switch, but the cost question should always be asked ahead of time of switching.
