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What makes an independent agency unique?
“Soooo, you’re an independent agent?” someone asks. “What does that mean? Or how does this work?”
Many people ask me this when they are trying to get their heads around why they would consider working with a local agency that doesn’t match up to one particular brand.
Drive down the street and there are the familiar brands such as State Farm, Allstate, or Farmers, or flip on the TV and you’ll see Geico’s $1.5 billion charmingly fictitious lizard. Continue on and you get to, wait a minute, Sensible Insurance PNW? Who’s this? And why would I do insurance with them?
It’s a good set of questions that we’d like to help answer, and since roughly a 1/3 of people nationally purchase their car or home insurance through independent agencies, we’re an option worth knowing more about.
I write this as an agent and owner of an independent agency here in Hillsboro, Oregon. I’ve been licensed and practicing for over a decade now.
To understand what sets independent insurance agencies apart, we need to start with how we all purchase our insurance.
How we purchase our insurance?
As consumers, we have the option to get our car or home insurance from two main avenues.
You can go direct or you can go through an agency. And within agencies, there are two broad types: one-company agencies or multi-company agencies. (Skip directly to the central benefits of working with an independent agency).
One option you have when purchasing insurance is to go directly to the carrier itself. This is where you go straight to the carrier for your insurance.
You call into a national call center to get your quotes, purchase, or make changes to your policies.
The most well-known direct carrier is probably Geico. Though they have started adding agencies in metro markets these past few years, they still are largely a direct company.
Agency: one-carrier or multi-carrier?
The next way involves going through an agency. Agencies usually involve a local or regional office that you can call into to get quotes or service your policies.
An agent is someone or a company that has been appointed by an insurance carrier to sell and service their products in exchange for a commission.
But there are two basic types of agencies! One-insurer or multi-insurer agencies.
One-Insurer Agencies, or “Captive” Agencies
One-carrier agencies are often called “captive” agencies by independent agents because they are contractually tied to one carrier. In other words, they can only sell and service the insurance products of one particular insurance company.
The most well-known of these would probably be State Farm, Farmers, or Allstate (though Allstate has been experimenting with the independent channel).
Multi-carrier or Independent Agencies
By contrast, independent agencies are called “independent” because they’re independent from just one carrier. Instead, they are agents of many carriers.
Their carriers can be large outfits such as Safeco or Travelers or Chubb. Or their carriers may be more regional operations such as Oregon Mutual based in McMinnville, OR, or Sublimity based in Silverton, or Mutual of Enumclaw up in Washington.
Depending on the size or approach of an agency, an independent agency may offer several carriers or even dozens.
Are independent insurance agents insurance brokers?
Because independent agents aren’t tied to one carrier, people often think of them like a mortgage broker, someone who can shop your needs with multiple places.
While the comparison works in a general sense, independent agents (especially in personal lines) are typically not acting as brokers, they’re acting as agents.
This is a distinction that we won’t dig too deep into, but it is important. In short, agents act on behalf of the insurance companies and accordingly have certain contractual obligations to the insurance carrier.
What kind of responsibilities? Well, as an agency they likely have certain production (i.e. sales) requirements, certain processing requirements (i.e. keeping records), and they certainly have underwriting obligations to the company. If the agency doesn’t meet such requirements, the insurance carrier can terminate their agency contract.
By contrast, “brokers” often have a contract directly with their clients and are compensated directly by the client to find them a solution.
Why work with a local agency instead of going direct?
Now between going direct or having a local agent, we–you guessed it!– prefer an agent. Why?
We like the idea of doing business with people who are more rooted in your community. It keeps more resources in your local community. For instance, we pay local taxes to Washington County, we volunteer at various places, are involved in a church, our kids are involved in local sports and schools, and we shop at local businesses too.
We like the idea of doing business with a familiar person or group of people. This can add a certain comfort level to the conversation that makes it convenient, quick, and pleasant to get your policies serviced. Moreover, if you have an accident or a question about the insurance, you’ll have someone who is more familiar to talk over your concerns with.
We like the idea of doing business with local professionals who have a better sense of the local risks and market. I’ve spoken with insurance representatives from elsewhere who tried to explain to me that the snow here in the Hillsboro area can be really hard on roofs. The person was an insurance professional, but he obviously had no idea that we get almost no snow here.
Not just an agency, a good local insurance agency.
We’ve been around long enough to know that there are good agents and lousy ones. This is true whether you’re working with the independent side or the one-carrier side. So work to get with a good agent.
What makes for a good agent?
Service Oriented: They should want to help you.
Many agents are super reachable when it comes to selling a policy, but what about when the thrill of the sale is gone, when you have questions or need to make some changes.
If they sound annoyed for no good reason or like they can’t be bothered to help . . . consider moving on.
Responsive: They should respond to you promptly.
This can vary some depending on the office, but the bottom line is that if you contact them during business hours you should hear back within a few business hours. If they don’t follow through or get back to you within 24 business hours . . . consider moving on. Ask them about communication expectations.
Honest: They should be willing to tell you the hard truths.
For instance, if the reason that your rate went up is because you have 3 towing claims and an at-fault accident, they should be able to tell you that even if they know it’ll make you mad. Or, if they made a mistake, they should own up to it even though it’s embarrassing. Or, if they think they can likely save you a significant amount of money with another available carrier, they should share that (even though it probably means reduced compensation for them). Finally, if they know you’ll probably be served better elsewhere, they should be willing to say so even if they’ll lose your business.
Knowledgeable: They should know their products.
Whether they are agents for one company or many, they should have a good sense of their product and be able to provide clear answers to your questions about it.
This doesn’t mean that they’ll know every intricate detail of their policy since the policies themselves can be quite complex, but they should at least be able to find out for you in short order.
Professional: They should respect your decisions.
The coverage options you select are your choice, even if the agent has recommended a different product. It’s one thing for them to suggest an option is worth considering, it’s another to keep pushing and pushing.
Won’t I pay more for working with an agent?
Not usually. Most independent agencies do not charge fees beyond what is included in their commissions contract with the insurance company. After all, they’re agents not brokers.
So, doesn’t that still mean direct carriers cost less? After all, direct carriers don’t have to pay commissions to agents. By cutting out the ancient “middle-man,” they can charge less, right?
While this isn’t a crazy thought, business reality is not that simple.
Being a direct insurer involves a series of financial tradeoffs. Those tradeoffs come with their own costs because local agencies actually do perform important roles for the insurance companies they sell. While a carrier may cut out local agents, they then have to compensate others for most of the work that the local agency would have done.
For examples, a carrier may cut out the local agencies, but now they have to entirely service the policies they sell. And now they have to entirely sell their product. And now they have to entirely market their own products because there is no local presence interested in marketing their products. As noted above, Geico led insurance companies in advertising spending in 2022 — $1.5 billion !!!
From my experience quoting thousands of policies, I’d say it’s not even usually the case that direct carriers cost less, but direct carriers are awfully happy for people to assume that!
Much of the time a lower cost is simply the result of lower coverage. (See our Important Steps for Getting Good Auto Insurance Quotes.)
What are the benefits of getting your insurance from an independent agency?
Above, we described why we think people are better off working with a local insurance agency than with a direct carrier. Local agencies more rooted in your area, they’re more familiar with the regional products, you can get to know them, and they are often similar in cost and even less expensive.
But we also think it is better to work not just with a good agency but a good independent agency. The fundamental advantage an independent agency has over other local options boils down to one major difference: multiple carriers.
An independent agency has access to multiple carriers. This matters from the very beginning, from when you’re shopping for insurance to when you’re re-visiting your insurance down the road. Why?
You don’t have to shop as much.
You can call three different one-carrier agencies such as Allstate, State Farm, and Farmers to get three separate quotes. That’s not a bad idea. You will get three separate quotes, and if you’re diligent, the quotes will be helpfully comparable. The agent should know their product, but they also will typically have less insight into competing alternatives because their contract allows them one company.
But with an independent agent, your one request will get you multiple quotes. Moreover, that one agent should be able to do a more thorough “under the hood” comparison for you since they can access multiple companies.
This means the odds are better that they’ll be able to find a competitive product for you.
When renewals come up, you also don’t have to shop as much.
Everyone knows that rates often go up at renewals.
When I worked for a one-carrier agency I felt stuck when rates went up. In reviewing a client’s package, we could certainly check for discounts, but most often our only real option to change the pricing was to remove or reduce coverage.
As an independent agency, we have other available options when we notice a big rate increase.
Moreover, because your current policy is in our office with all its coverage details, we can much more easily do a genuine comparison with another company. And that means that we are in a better position to help you understand more accurately what you might be gaining or losing by switching carriers.
Now, we don’t recommend switching carriers frequently, nor can we always find a better option, but quite often we can find a better rate for you and sometimes that rate even comes with improved coverages.
To put it briefly, we can help you switch insurance, but you don’t have to lose your agent.
If you have a special insurance need, the odds are better that they’ll be able to find you something.
Because they have more options, they’re more likely to have specialized policies and coverages that fit your needs.
If you’ve got a landlord policy, a manufactured home, a house within 1000 feet of the coast, or want better earthquake coverage, or want coverage for long-term hidden water damage, or OEM parts coverage on your car, the odds are better that an independent agency will be able to find you a solution. They have more options.
How do claims work at an independent agency?
The advantage of being with a local agency where you know the agent and staff is that you can call with questions you have about claims. They can help you think through whether or not to file a claim or to get your bearings during a claim.
Now, whoever you’re insured through, your claims are ultimately handled directly with the insurance carrier’s claims representatives.
But sometimes the claims process can be a little bit disorienting. That’s where it can be handy to have an agent you trust. They can call and talk to claims reps with you, they can advocate for you, and they can help clarify the process and answer questions you have.
When considering where to get your personal insurance, we believe you’re better off getting your insurance from a good and local independent insurance agency. You will be working with people who are more rooted in your community, who know the region better, and who–because they have access to more insurance carriers–are more likely to have what you need and save you money, especially in the long run.