How Independent Insurance Agencies Work For You
The Insurance Industry in the U.S. Source: Statista
Such a huge number of possible options should make choosing easy, right? Sadly, we can only wish it was that simple and straightforward.
Insurance is not like your typical milk and bread, which you can easily shift between brands without any repercussions. A cover is pretty much a promise of protection. It could make or break your physical and economic well-being, in case of a possible disaster.
Every company is distinctively unique, like the customers they serve. Of course, you might be tempted to go for the cheapest- because who doesn’t want to save a couple of bucks every year? After all, don’t they say the best insurance companies have the cheapest covers?
Well, cheap is good. But cheap could as well be just that when you file a claim- cheap. Therefore, considerations when purchasing insurance should extend past cost. You should be equally concerned about how the companies operate, and how you expect to be treated depending on their type.
There are two principal types of insurance companies- direct and independent.
A direct agency is run by captive agents. A captive agent is an agent who only works with one insurance company.
while an independent agency, as the name suggests, operates independently- as we’ll be looking into shortly.
The Number of people engaged in Direct and Independent Insurance Agencies. Source: Insurance Information Institute
These two are as different as summer and winter. The process of sourcing for possible insurance policies is completely different. And so is coverage management and claims.
Essentially, an independent insurance agency will handle you differently compared to a direct insurance provider.
That said, let’s get down to the nitty-gritty. What is an independent insurance agency? How does it operate? What should you expect as a custome?
What Is An Independent Insurance Agency?
Traditionally, insurance providers did not sell their policies directly to consumers. Instead, they offered them through third-party agents, who had to be professionally licensed. And the agencies, in turn, earned commissions for every insurance cover sold.
Then came the proposal to cut out the “middleman”. Consumers can now directly engage insurance companies, and conveniently purchase various coverage through the internet. As a matter of fact, 71% of consumers are now using the internet to search for insurance covers.
Purchasing Insurance Directly. Source: Jago Investor
To some, cutting out the “middleman” was a long time coming. It was expected that it would ease buying and make insurance cheaper.
On the flip side, directly engaging insurance companies is not so simple anymore. Their numbers are growing and comparing policies is getting harder.
Additionally, insurance legislation is getting more complicated at both the national and state levels. 2010, for example, saw the enactment of a rather drastic Dodd-Frank Wall Street Reform and Consumer Protection Act.
Evidently, keeping up with the dynamic insurance environment is becoming harder. So, how are you expected to have the knowledge to assess insurance companies?How will you even negotiate with seasoned sales representatives from these companies?
And that’s precisely where an independent insurance agency comes in. Instead of selling insurance from one provider, such agencies deal with a multitude of policies from different providers. Unlike captive agents, independent insurance agents are not tied to specific insurance companies.
Is there anything more valuable than an insurance expert who’s not loyal to any particular provider? That’s why it’s easy to score genuine insurance advice from independent insurance agencies. They act as intermediaries and do the hard work for you.
How an Independent Insurance Agency Operates
Think about it. One agency, multiple insurance companies, countless policy options. Seems like a lot of work. But that’s why they are not considered salesmen. They are more like advisers.
One interesting fact about an independent insurance agency is that it doesn’t actually work for the insurance company. The chief boss is you- the client.
Without the technical expertise, it would take you months to comprehensively evaluate the whole insurance industry. And that’s only if you’re doing it persistently. Compare that to simply getting in touch with an independent agent for quick advice on any type of insurance.
An independent insurance agency doesn’t just compare the costs of policies offered by various providers. Agents delve into the nitty-gritty, and advice their customers on the pros and cons of individual policies. Their familiarity with the providers’ histories and customer service is particularly handy when it comes to this.
Consider a highly ranked insurance provider, for instance. On paper, it may seem like a safe bet for all types of insurance covers. And you might commit yourself without additional research.
Even if you’re keen enough to seek more information, details could be scanty and inconclusive. An independent agent- on the other hand- would be able to identify such a company’s strong points. Plus its correspondingly weak policies right off the bat.
Sadly, working for you as opposed to the insurance company has a caveat. Independent insurance agencies cannot adjust your policy premiums. They can secure a good deal for you, but their role only ends at the negotiating table. Only insurance providers have direct control over various premium prices.
Having no direct control, however, doesn’t render them completely powerless. They engage providers to seek legitimate reasons for any premium increase.
Although some insurance premiums have appreciated exponentially over the past couple of years, the average annual growth rate in the U.S. is 3-5%. This usually caters to inflation costs and management costs.
Any increase past this standard growth curve attracts an extensive review by independent agents. Ultimately, they may advise you to switch to a cheaper, alternative plan.
Average changes in auto insurance premiums 2004-2014. Source: Quora
What To Expect From an Independent Insurance Agency
And now the big question. What should you expect from your independent insurance agency?
Countless Insurance Options
With 58% of commercial lines, 35% of personal lines, and 58% of all lines, independent insurance agencies represent the biggest chunk of the insurance industry.
Insurance Available Through independent Agents vs Captive Agents. Source: The Independent Agents & Brokers of America
Thanks to this, they always have a wide range of insurance options to consider.
Well, of course, you might argue that the internet is also a great tool to research and compare rates by different companies. It should be as easy as seeking different quotes, right?
This approach may indeed give you several quotes. But, isn’t crawling through the web, filling multiple applications extremely cumbersome? Plus, insurance quotes generated online tend to be erroneous more often than not. The providers will stereotype you as the average American consumer.
Independent agents, on the other hand, will keenly review your status and conditions before offering possible covers. Your needs eventually determine the options you settle for.
So let your agents do the shopping. You worry about the saving.
Insurance is a business. Every provider is trying to make an extra dollar for every possible situation. So it’s literally impossible to get unbiased professional advice from one. Try seeking and you’ll end up talking to a captive agent eager to close a deal.
Compare that to licensed experts who are not attached to any specific insurance provider. They follow recent trends and completely understand the industry inside out. Even more importantly, they know exactly what to look out for within the fine print of policy T & Cs.
After analyzing your needs and interests, they offer professional advice to help you minimize your risk levels and premium prices. And the best thing about this relationship is that it’s permanent. You can always reach out with more questions to clarify grey areas.
Assistance With Claims
Filing an insurance claim can be difficult and challenging. It could be a nightmare if it’s your first time. Insurance providers do everything within their legal capabilities to save up on claims.
In the automotive world, for instance, the average auto insurance claim is $3,160.
Average Cost Per Auto Insurance Claim. Source: Guiding Metrics
Going by average industry estimates, you’ll be filing a collision claim every 17.9 years. That translates to about 2-4 times per person in a lifetime.
Unfortunately, most insurance policies are in a complicated legal language. So it might take you some time to break it all down and file a solid claim. Overlooking the fine print could lead to an unfair compensation. To make matters worse, your premiums might also be bumped up significantly after the payout.
But working with an independent insurance agency gives you a strong advantage. They know the paperwork and all the dirty, little tricks providers use to finesse their way out of possible payouts.
Their experience in these processes is, in fact, way more critical during the initial application process. The agents will help you avoid companies that could prove to be difficult in case of a claim.
Insurance companies are particularly fond of marketing themselves through discounts. They promise multiple deductions, only to decline applications based on “technicalities”.
Fortunately, this doesn’t apply to all providers. Genuine discounts exist. And most times, you have to meet specific criteria to qualify. That’s where independent insurance agencies come in.
Your agency understands your life and insurance variables. So they’ll update on possible discounts you could qualify for. Then guide you through the whole application process.
For example, if you have several covers from one provider, your agency could help with applying for a multiline discount. This could save you more money than cheap covers from different providers.
● As of 2016, there were 5,977 insurance companies in the U.S, with a driving force of 2.6 million workers.
● There are two principal types of insurance companies- direct and independent.
● A direct agency is run by captive agents, while an independent agency, as the name suggests, operates independently.
● 71% of consumers are now using the internet to search for insurance covers.
● Instead of selling insurance from one provider, independent insurance agencies deal with a multitude of policies from different providers. Unlike captive agents, they are not tied to specific insurance companies.
● An independent insurance doesn’t actually work for the insurance company. The chief boss is you- the client.
● Independent insurance agencies cannot adjust your policy premiums. Only insurance providers have direct control over various premium prices.
● Independent agents engage providers to seek legitimate reasons for any premium increase.
● With 58% of commercial lines, 35% of personal lines, and 58% of all lines, independent insurance agencies represent the biggest chunk of the insurance industry.
● Independent agents review your status and conditions before offering possible covers. Your needs determine the options you settle for.
● Independent insurance agencies follow recent trends and completely understand the industry inside out. They know exactly what to look out for within the fine print of policy T & Cs.
● After analyzing your needs and interests, independent agents offer professional advice to help you minimize your risk levels and premium prices.
● Independent agencies know the insurance claim paperwork and all the dirty, little tricks providers use to finesse their way out of possible payouts.
● Your agency understands your life and insurance variables. So they’ll update on possible discounts you could qualify for. Then guide you through the whole application process.
Feel free to your expectations and experience with independent insurance agencies.