The Difference Between a Captive and Independent Insurance Agency
An independent insurance agency is a company which sells insurance from one or more insurers, thus offering a wide range of choices from which their clients can choose. Captive commercial insurance agencies are limited to selling insurance from only one insurance carrier, that of their parent company and its affiliates.
Independent Commercial Insurance Agencies:
Along with providing a variety of insurance carriers, independent insurance agencies are thought to offer their clients greater customization of policies, the potential for substantial savings in premiums from comparing those policies and are seen as representing you, the client and not an individual insurance provider. An independent insurance agent is not employed by the insurance providers which are represented by the agency. They are generally paid on commission or a percentage of the total price of the policy sold to their client.
As a rule, independent insurance agencies do not advertise on a national or international basis. Therefore, they do not enjoy the same name recognition as do their counterparts. Often the companies name will include the owner's given name, for example, the "Joe Smith Independent Insurance Agency".
Captive Commercial Insurance Agencies:
A captive insurance agency is a company formed for, and generally owned by, a parent company to underwrite its own insurance needs and those of its affiliates.
The majority of major corporations have their own captive insurance companies. Examples of corporate parent companies and their respective captives are: Exxon-Mobile and Ancon Insurance Company, CBS Corporation and Fidelity Insurance Company, Zurich Financial and Farmers Insurance Group, and, Allstate Corporation and Allstate Insurance Company. The latter two are examples of well-recognized, nationally advertised captive insurance agencies.
Non-profit organizations are increasingly forming their own captive companies as well. The University of Michigan and its Veritas Insurance Corporation is one example of this growing trend.
Agents working for captive insurance companies are limited to selling one product to their clients. Therefore, the policy that is offered is often viewed as less customized towards the needs of the insured.