What is the difference between an independent insurance agent and a direct writer?

An insurance agent is an employee, subcontractor or business owner in the insurance industry who is paid in some way to sell insurance policies that cover repair or replacement of various forms of property related to one or more life areas. Insurance plan coverage options include auto, home, health, life, business/commercial and travel. An insurance agent might sell a basic policy or a custom policy that includes upgraded services and extras designed to provide greater coverage. The description "insurance agent" is considered a broad term. Consumers typically use it to describe anyone that they interact with to set up and maintain insurance coverage and file claims.

The term "insurance agent" is also used to differentiate between types of agents: Many consumers incorrectly use it to define a representative that works for them to find the best product to fit their needs. The term "independent insurance agent" is the more correct description in this scenario. An independent agent partners with many different insurance companies. Independent agents help consumers find the right insurance carrier, policy and price to fit their needs with no bias toward any one company. An independent insurance agent usually receives a commission for setting up new policies or upgrading services for existing policyholders. The term "independent insurance agent" is used to describe both standard independent agents and brokers. Although consumers often use the two descriptive terms interchangeably, a broker is a licensed independent agent who usually has more knowledge about the industry and offers the most product options. Since brokers can lose their licenses, they do everything they can to offer the highest quality products and services. Some brokers also charge an extra "administrative" fee for their work. Lastly, consumers interact with a type of insurance agent known as a "direct writer." Simply put, a direct writer works as an employee or contractor selling the insurance products of only one company, such as Allstate, Geico or State Farm.

If you are uncertain about whether you should choose an standard independent insurance agent, broker or a direct writer, consider the following: An independent agent is a third party representative who shops around for the best deal. You might interact with only one person or several people working in an agency. Since independent agents represent so many companies, they usually have the most academic and hands on experience with the entire insurance market including laws related to more than one area. As a result, an independent agent is more likely to act as an educator or adviser and teach you about the industry and your options. An independent agent is also more likely to help protect your interests and assist you to resolve any issues you have with the insurance carrier. Again, a direct writer, as mentioned, only offers you one company's products and services. For this reason, direct writer are often referred to as "captive" agents because they are unable to help consumers shop around with other companies. Many consumers enjoy working with a direct writer instead of with an independent agent as they do not have to get information second hand. The biggest downside of working with a direct writer is that you are more likely to receive biased advice since a direct writer is paid by the insurance company. A direct writer is also less likely to act on your behalf and/or give you sound advice during a dispute with the insurance company.

Consumers interact with all of these types of insurance agents in a variety of settings. In your geographic region, you might work with a local or non-local standard independent insurance agent, broker or direct writers. Your interactions with an insurance agent might take place face-to-face in a local office and/or over the phone. In some cases, you might interact with an independent agent at the local level and then also with employees/contractors of your insurance carrier over the phone. For example, the American Automobile Association's has in-store insurance agents that set up policies through different companies. Depending on your needs, you might also work with employees or contractors of the insurance carrier over the phone or use the carrier's online portal to check out policy information, set up new services or pay a bill. You might also handle your account primarily through an insurance company's online portal and rarely interact with any type of agent except for brief remote interactions via phone, email or chat.