Before you buy insurance, it’s important to understand the major ways insurance is sold, then determine which one is right for you. Generally speaking, insurance can be purchased through one of three distribution channels:
- Direct Writers
- Captive Agents
- Independent Agents
Direct Writers
Direct writers are insurance companies that market and sell insurance directly to the consumer through the internet and 1-800 numbers. They usually have large call centers to sell and service their policies. Because direct writers don’t have agents out in the field, they rely heavily on advertising, so you have probably seen their commercials and received their postcards. Common examples include GEICO and E-surance.
What I like about Direct Writers: You can conveniently buy insurance 24/7 through call centers and online.
What I dislike about Direct Writers: Direct writers are mass distrubitors who are focused on volume. The sales agents are less likely to be seasoned professionals and you're less likely to recieve personalized advice. It can also be impossible to speak with the same person more than once if you have an on-going problem or issue.
Captive Agents
Captive insurance agents are local agents who represent one insurance company. Common examples include State Farm and Allstate.
What I like about Captive Agents: Captive agents are local so they are your neighbors and support your community. They can meet you face to face. Also, because captive agents only sell one brand of insurance, they are typically very knowledgeable about the specific features and benefits of the policies they sell.
What I dislike about Captive Agents: The down side of representing one insurance company is that you will not get more than one option. If that particular insurance company’s rates increase, or if they cancel your policy, you will have no other option with that agent. Some agents may have alternative options, but generally speaking, captive insurance agents are committed to only one insurance company.
Independent Agents
Rather than representing one insurance company, independent agents have the ability to represent many different insurance companies and offer options to their clients. For example, Wren Insurance Agency represents many auto insurance companies, such as Travelers and Safeco, to name a few. If an insurance company drops you, or if your rates substantially increase, the independent agent can place you with a different company. This saves you money, time and hassle. The independent agent usually remains the client’s point of contact, despite the client being insured with various insurance companies for various policies.
What I like about Independent Agents: Independent agents, like captive agents, are local and can meet with you face to face. The similarities end there, however. The independent agent has many different options to present to the client, rather than just one insurance company. Independent agents are very good at providing the best value for their clients. Also, if you do not have a lot of time to shop around yourself, the independent agent’s ability to shop multiple insurance companies will give you access to many options without having to do the legwork yourself.
What I dislike about Independent Agents: Because agencies are independently owned and operated, typically with out a parent company or home office, the level of service and expertise will vary greatly by agency.
Hybrid Models
There are some insurance companies that operate with more than one distribution channel. For example, some direct writers have set up local offices because they understand many people like buying insurance face to face. Also, many captive and independent agents offer the ability to purchase online.
So which one is best for you?
This can only be answered once you assess and prioritize what is most important to you in your insurance program.
Many people use price as the main factor when comparing insurance options. This makes sense because price is the only factor that can be easily compared (and of course, everyone wants to keep costs down). While price should be one of the factors you consider, it should never be the only factor (even though many insurance ads want it to be).
A fellow insurance agent who I respect once wrote:
"Insurance is designed to financially protect everything that you have ever worked for or cared about. That’s the whole ballgame. Think about it. The extra hours that you put in at work to afford that car you always wanted. The labor of love that is your first home. The lifelong planning for your last home. Think about the sacrifices that you made in order to plan for the kid’s education or your retirement? Insurance is designed to protect the financial milestones of life, present and future. This is serious business."
If you subscribe to the above thinking - that insurance is designed to protect “the whole ball game” - then I recommend that you take advantage of the expertise, advice, and personal service that a knowledgeable and local insurance professional can offer.
The ability to know you as a person, to understand your needs, and to put their arm around you when you file a claim, can really only be offered by captive and independent agents. So I recommend that you start by exploring captive agents and independent agents (such as Wren Insurance Agency) first.
From there, make sure you are working with a knowledgeable and trust-worthy agent who offers good insurance companies and service.
If you're buying insurance and have any questions, please contact us. We would love to have the opportunity to review your insurance needs and offer options.