two captive insurance agents shaking hands after discussing how to become independent

Within the insurance industry are several different types of businesses. Apart from companies specializing in specific coverage such as commercial space, life insurance, and farm insurance, some operate as captive agencies and independent agencies.

Captive Versus Independent Insurance Agencies

Some agents want to make a transition from a captive insurance agency to an independent insurance agency. However, before going into any details about how to do that successfully, it would help understand what makes each unique.

  • Captive Insurance Agency – This type of agency works with just one insurance company. In other words, a captive insurance agency only sells the products that a particular carrier offers and, typically, nothing more. This can often limit a client’s options for coverage and premiums. 
  • Independent Insurance Agency – An independent insurance agency represents multiple insurance companies. As such, an agent can compare every aspect of insurance policies to find their client the best deal. That includes the type of policy, deductibles, claims processing, premiums, and more. Ultimately, clients have far more diversity and freedom for insurance coverage.

It can be seen this way. In a Nike store, the only brand customers can buy is Nike. Although Nike shoes are of high quality, and they come in a variety of styles, colors, and sizes, the customer has limited options. Now, if customers walk into a retail shoe store, they could buy the Nike brand, as well as Adidas, New Balance, and many others. That gives them far more variety.

Many agents feel they can better serve clients by transitioning from a captive insurance agency to an independent insurance agency model. The following are some of the factors involved in making the transition.

Carefully Review Your Contract

Before making any move, you need to know what’s in your contract. Keep in mind that if you need help deciphering the contract, it’s best to reach out to an attorney who specializes in contract and insurance law. The biggest issue comes from “blackout periods.” That means the captive agency would block you from selling policies to the clients you’ve served for years.

On the other side, before locking into anything with an independent insurance agency, read the contract word for word. In particular, make sure it has a “free release” clause. That way, if you choose to leave, you can go without any repercussions. Regardless of the contract, you don’t want the company to prevent you from taking your list of clients.

Consider Legalities

Depending on your situation, you might need to borrow money to get your independent insurance agency up and running. There are other legal aspects such as taxes, accounting, and even insurance coverage for the business. Make sure you have all of these taken care of as quickly as possible. Otherwise, you could find yourself in a position of not working while certain things get sorted out.

Develop a New Website

Even if you already have a website up and running, it’s a good idea to start fresh. Not only will that eliminate any connection to the captive insurance agency, but it’ll also allow you to market your customers according to your practices and beliefs. Make sure your insurance agency’s website looks professional, is easy to navigate, and gives individuals and businesses several ways to contact you to discuss coverage.

Change Your Mindset

While working for a captive insurance agency, you probably processed things from a corporate mind. However, once you transition to an independent agency, you need to think more like an entrepreneur. To succeed, you’ll need to change the way you view insurance as a whole.

That includes coming up with unique marketing strategies. Rather than take more of a cookie-cutter approach, you need to get creative. You’ll also need to decide how you want to structure your agency and invest in insurance agency management software. That’ll help you monitor key information, connect better with your clients, and grow your business.

Spread the Word

As an independent agent, it’s your responsibility to promote many different insurance companies. However, the only way they’ll know you exist is by getting your name and the name of your agency to them. So, you’ll need to contact as many carriers as you can.

Networking and Support

Once you transition from a captive agency to an independent one, you want to start networking and building a support system. Especially when representing multiple carriers, you’re going to have questions and need guidance. Rather than try to do everything yourself only to fail, reach out to other professional independent agents. You can also join various associations and attend events as they arise.

Get Your Clients the Insurance They Want and Need

Although it takes some time and effort to transition to an independent agency, it’s worth it. Now, you can introduce your clients to all kinds of new products, help some get lower premiums, expand your product offering and, ultimately, make more money.