When it comes to buying financial products, it is very important to work with a professional who is agnostic towards different companies and is willing to find the best product for their client’s needs. As a consumer, you can choose who you work with based on the advisor and what they ultimately can offer you.

For example, there are two types of insurance agents: captive and independent insurance agents. A captive agent works for a particular company and offers exclusively their products, with a few rare exceptions when the necessary product isn’t offered by their company. State Farm, ALFA, Northwestern Mutual, & Woodmen of the World are a few common examples of companies that function in this capacity. Most captive firms either do not allow their agents to write other companies or strictly frown upon it and set sales targets incentivizing agents to write the company product. 

Simple logic would suggest that the odds of one particular company having the best insurance product at the best price for your needs are highly unlikely. It’s a good rule of thumb to rule out working with a captive agent for that reason alone. Not only that, those agents are incentivized to sell their products and are not going to tell you if there is a better product than what they offer because it is not in their best interest. It would be the same way if you went to a car dealership and they said to go down to the other end of Skyland Blvd. because they’ve got better prices. 

An independent agent, on the other hand, is not limited to one company and is licensed to write insurance with as many companies as they wish to do business with. However, there are many times when an independent agent only writes one or two companies, and is not much different than a captive agent. This is for a couple of reasons. The most common reason is familiarity. An agent might be licensed with three or four companies and will always write a particular product for a certain need. This product might be competitive, but it may not be the best product on the market at a given time. However, since the agent is very familiar with the company, they will simply write the company based on muscle memory and familiarity. 

Another reason an independent agent may not really focus on different companies is that insurance companies strongly incentivize agents to write their product by giving agents offers to go on paid-for luxury trips around the world. These trips are based upon an agent writing a certain amount of commissionable premium, and if an agent writes several different companies, there is no practical way for them to ever win any sales competition to go on these trips. For this reason, many independent agents actually function a lot like captive agents because they really only consider one or two companies at the end of the day.

Personally, at the time of writing this, I have never been on a production-related insurance company trip before. I write so many different companies that I never qualify for any of the trips that I regularly see in my email. But that is perfectly okay, as I prefer to pay for my own trips and take my family wherever we want to go instead.