DISCLAIMER: This article is very vague and watered down for basic knowledge, this is not (yet) one of the Ten Commandments.
Insurance terms are about as fun and easy to understand as French. It can be daunting trying to understand all the terms at once. So, we will start slow here in INS 101 and go over the difference between what you think an insurance agent is (you probably think Allstate or State Farm) and what they truly are.
You’re probably thinking about a State Farm agent when you think “insurance agent” but that is an incredibly narrow perspective. That’s like saying everyone who’s a doctor works in the hospital, big generalization right? Independent agents and captive agents are about as different as general surgeons and university professors, both are doctors though. Think of an independent agent (Three Arbor) as a stockbroker going to the stock exchange to find stocks that fit your portfolio. In the insurance world, shopping in insurance is called “going to market”. This term, “go to market”, is super insurance-y and is a cool way to make people think you know what you’re talking about. All it means is going shopping for insurance i.e., a stockbroker going to the NYSE to pick the best stocks for you. Independent agencies can go from one carrier to another to find the best coverage and competitive prices for the coverage our client needs. If we don’t like one coverage, no problem we’ll go to the next carrier to offer the best product to our client.
So, if that is what Three Arbor does, then what does the State Farm guy down the road do? What you are thinking, and what most people think when they say “insurance” or “insurance agent” is a captive agent. Captives agents are your State Farm, Farmers Insurance, and Allstate agents. A captive agent does not “go to market” because the captive agent only sells the agency’s policies. So, if you walk into a captive agency’s office you will only be provided coverages the agency offers, an Allstate agent offers Allstate coverage. Whereas an independent agent can get coverage from different carriers like CNA, The Hartford, or Liberty Mutual (Liberty Biberty).
Sometimes, independent agencies will go to a different market, called the non-standard market (also called excess and surplus, E&S, or wholesale market) but that is more of an INS 201 topic—Au revoir.
