The captive agent is a fully licensed insurance agent that promotes the offerings of only one insurance company. Captive agents may choose to function as independent agents, or be associated with an insurance company as a full time employee. In either case, the captive agent only sells the types of coverage offered by the one insurance provider.
While the captive agent can be found as both a full time employee or as an independent contractor, captive agents are more commonly directly connected with an insurance company. Along with the option of being a full time employee of the company, insurance agents may choose to negotiate a working agreement that allows ample commissions on sales of policies provided by the insurance company. In return for the enhanced rate of commission, the captive agent will commit to only representing the coverage offered by the insurance company. This is in contrast to the usual practice for independent agents, who often are authorized to write policies for several different insurance companies.
One advantage of dealing with a captive agent is that he or she is very likely to understanding every nuance of every type of coverage offered by the company. Since the agent handles no other insurance companies, it is important that the agent be able to convince consumers that the company offers the best insurance options on the market. This can only take place if the agent possesses a comprehensive knowledge of what each level of offering will and will not provide in the way of coverage.
Insurance companies also benefit from captive agent agreements, especially when they involve independent contractors. An independent agent will work on commission, which means the insurance company does not have to extend a salary or benefit package. In return for the higher rate of commission, the company has more people working in the consumer market to pursue new business with less of an initial investment.