Have you ever wondered why some insurance agents like to suggest some insurance products or companies more than others? There are a lot of reasons why this happens. Some reasons may be legitimate concerns while others may have to do with the agent and his relationship with the carriers. Let's take an objective look at why this happens.
To begin with, there are generally two types of agents. "Captive" agents work for insurance companies with an exclusive agreement to only sell their products and products of other carriers that have some sort of pre-arranged contractual obligation.
An example of this is when briefly worked with a company who had a limited menu of policies. We had term and universal life, a horrible cancer plan and an accident policy. There were agreements in place with other companies to sell their health plans and long term care plans, but generally speaking those policies were not very good.
In exchange for working with this company as a captive agent we were given weekly training, a cubicle with a land line telephone, and other office accoutrements, like a receptionist and access to a fax machine. Sometimes there are even some benefits included, like health coverage.
As a captive agent, one is generally required to hit sales numbers that are mandated by the carrier and the agent is actively overseen by a manager*. This is part of the answer to our original question.
On the other hand, an "independent" agent can offer a wide variety of products (not including the ones from the captive companies), but for the most part have to take care of covering the costs of overhead, like rents and phone bills. No benefits here though, as the agent must pay for these costs. There are no sales quotas or managers, just agents trying to find the best fit for the client.
Years ago I worked with a company that had a blend of the two scenarios, where we had to hit the company's numbers to retain our contract and benefits, but were still free to offer products from other carriers. One agent sold the bare minimum of our employer's products but preferred other products because they were less expensive for the clients and paid her higher commissions.
The issue for consumers is that they don't know if their agent is always working in their best interest or not. As someone who has worked in both types of agencies I can say that for the most part agents are trying to do the best they can for a client. However, there are those who, because of the limited variety of products they have available to them, will try to sell something that may not be a great fit.
I have worked with both formats over the years. In my opinion, working with a captive company is especially good for newer agents who would like training on subjects from product knowledge to prospecting for clients. After a year or so of this, the agent may decide to move over to an independent status. My personal preference is to work independently. I still take advantage of training opportunities when they come along, but the less structured work environment means that I can be available for a client when they need me.
An old veteran agent once told me that captive agents work for a company, while independent agents have companies who work for them. And if the companies don't do their job right, the agent can fire them. It's true to an extent, as I can stop placing business with an insurance carrier anytime.
*The sales manager is always looking over your shoulder, even when he's not there.
Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!
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