Insurance Agent Types – Pros and Cons

You can only get insurance from an insurance company directly from its website or its representative, who has the authority to produce business for the company. You should know different types of representative agents, including their pros and cons. To start, let's understand an insurance agent's qualifications.

To become an agent, one must become licensed in the State where they wish to sell insurance products. States regulate the insurance industry, and all individuals and businesses that deal in insurance must meet specific educational requirements, sit for an examination for each insurance type they desire to work, undergo a background criminal check, pay the required fees, and register with the State. To maintain licensure, every one to two years, individuals must take a certain amount of continuing education courses, including ethical standards. Certain specialty insurance products require an agent to acquire additional endorsements and education beyond the standard requirements, including those selling long-term care, variable life insurance, and annuities.

An insurance agent has a fiduciary duty to applicants and insured clients. A fiduciary duty requires the agent to act for the benefit of the applicant or insured on all matters within the scope of their relationship. According to Black Law's Dictionary, a fiduciary "owes to another the duties of good faith, trust, confidence, and candor." An insurance agent has a heightened standard of care when making policy recommendations, accepting money for premiums, and accessing another's personal information. 

Types of Agents:

1.     Captive (exclusive career) Agents represent a single insurance company and are paid directly from that company, generally by commissions alone. 

2.     General Managing Agents receive overriding commissions on business produced by agents within a specific geographical area they manage.

3.     Direct-writing Agents work for companies that pay them salaries to sell their products from one of their offices. These agents are usually not paid commission, and the insurance company owns all the business they produce for them.

4.     Independent Agents represent the client and work in their best interests. Independent agents contract with several companies to sell their insurance products, but they work for themselves. 

5.     Direct Responder Agents are not a "real" thing, but allow me to explain. The caveat here is that no true agent exists aside from artificial intelligence (AI) or other computer systems responding to an online or telephone inquiry to apply for insurance.

Now that you are familiar with the different types of agents and their qualifications, you can make an informed decision. Let's briefly discuss the pros and cons of each type, empowering you to choose the best agent for your needs.

What's Best For You?

〰️

What's Best For You? 〰️

If you know the specific company you want to contract with, a captive or direct-writing agent offers the benefit of being an expert in that company's products since that is all they deal with regularly. For those who are more liberal and willing to shop around amongst reputable insurers for the best one to meet their specific goals, an independent agent wins out as they are the only type of agent that has no incentive (hopefully!) to lean towards any one insurer – they work in your best interest which may mean choosing one company over another or switching companies for you. Applicants typically have little access to a general manager, but it's good to understand the hierarchy involved; this can be favorable when someone higher than the agent may have access to more resources, training, and products that an agent can use that benefit the applicant. When you're averse to human interaction, look for websites that offer direct responding "AI agents." Bear in mind that they, too, may be prone to miscommunication.

We hope this information has helped you understand the different types of insurance agents and their qualifications. Thank you for reading!

Please read our post from September 17, 2024, Exploring the Versatility of Life Insurance: Ways You Can Use Your Policy, to arm yourself with a better understanding of your goals and who might be the best agent to work with to achieve them.