Now that you're licensed as a Texas insurance agent, what’s next? Obtaining the license is only first step in your insurance career. If you’re newly licensed, you’ll find it difficult to get appointed as a new agent. The best way to entering the insurance business is to get going and get experienced. Since there are so many different distribution methods, it’s best to take a look at the three main methods in which most insurance is sold.
Direct Writer – Insurance Company Employee
A direct writer is an insurance agent that works for one company and is involved in their selling system. Generally, these type of agents earn a base salary (and production bonuses) through call center distribution centers. Renewal commissions are not paid to the agent. Instead, the agent earns salary increases based on their results. The insurance company owns the clients sold by a writing agent. Become a direct writer is a good position for someone new to insurance and lacks the experience or funds to become purchase an agency or start one on their own. Examples of direct writers include; Progressive, Geico, Liberty Mutual, USAA, and 21st Century
Captive Insurance Agent – Independent Employee Agent
A Captive agent is one that represents one company. Generally, this type of agent can offer several different products under one company’s umbrella. Captive agents are generally compensated by commission and other bonuses for writing profitable business that stays with a company from year to year. The captive agent usually specializes in auto and home insurance but they may offer a limited number of life insurance and business insurance products. Ownership of the client base varies based on the agent’s contract with the insurance company. Generally, these types ofcompanies require a large capital investment for things like purchasing a client book and location from a former agent, opening new offices, marketing, etc. Because of the large capital investment needed to become a captive agent, these companies tend to have high quality training programs. In essence, the agent buys the business with his initial capital investment. Examples of companies with captive agents include: State Farm, Allstate, Farmers, and Nationwide.
Independent Insurance Agent
Independent insurance agents and brokers come in all shapes and sizes. These agents offer different products from different companies. Becoming authorized as an independent agent can be rather difficult if you have little or no experience. Some companies will offer appointments to virtually every agent that applies to become an agent while others will want to know more information about your background, experience and business plan. Many independent agents have production goals. As a result, many agents join clusters, aggregators, and MGAs to avoid production goals; in exchange for reduced compensation and service. Generally, captive agents become independent agents after transitioning from being a captive agent. Compensation for independent agents simple, commission and bonuses. Examples of companies that use independent agents include: Travelers, The Hartford, Liberty Mutual, Progressive, and Kemper. Commissions tend to be higher for independent agents because the companies know independent agents can place business with any carrier they are authorized to sell. The independent agent owns his clients.
Ultimately, You decide your path
There are pros and cons to each agent type. The Direct Writer of a base salary offers the ultimate security of a base salary and home office training, while limiting the agent’s ultimate earning power. On the other hand, having a big name like State Farm or Allstate combined with all the structure, training, and support that goes with a large company can make becoming an insurance agent much easier. However paying for your own expenses and only representing one company and requiring large initial investments could make the life of the captive agent difficult during tough markets. Ultimately, the independent insurance agent presents the agent with the option of selling any and every product available on the market without exception. Companies like Liberty Mutual, Allstate, and Farmers write business through independent and captive agents alike. Commissions and bonuses are available to agents of all types. Ultimately, you must decide which route to becoming an agent is best for you. Whether you want to start as a direct writer or captive agent and transition to becoming independent the choice is yours.