How Independent Insurance Brokerage Companies Are Destroying Insurance Dinosaurs

Watching independent insurance brokerage companies become universal kings is like watching an old Godzilla movie. Long ago, captive racing firms saw their power begin to wane like an insurance dinosaur. Their greed and lack of complete domination of the industry allowed independent brokerage firms to capture their key warriors.

For more than 100 years, Insurance Carriers have reigned as profitable financial giants. Unfortunately, for them, financial gain meant power. Power that could be used against deed insurance representatives to control almost all of their actions. This is still used on captive career agents. They try too hard for a year to please the company and make a miserable living. After the agents fail, the captive insurer steps in and takes over all of the policyholders’ premiums for itself, with the former agent totally private.

The scales of justice have tipped.

Agents’ eyes widened when suddenly one of the largest and most financially rated independent insurance companies went bankrupt. Without the help of a huge bailout program from the federal government and taxpayers, virtually untold thousands of policyholders in America could be left stranded. Insurance representatives no longer believe the big insurers when they brag about their ratings.

Hundreds of thousands of life and health insurance representatives have decided to go independent. This means giving up the golden egg renewal benefits that insurance providers could provide as long as the insurance representative remains with the company. However, an independent minded progressive insurance company can now provide even higher renewals, plus renewals are granted for life (with lower renewal requirements). Giving it up, to cut the strings of the company’s career and gaining freedom means a new and profitable life insurance career for many agents. This means that the earnings exceed the security anchor of your old career agency.

As agents turn professional, they need a professional income. It means receiving up to 60% more salary using a “brokerage” insurance company than career insurance. The new movement has also prevented the insurance career from being king in another sense. This is the semi-independent agent who still writes a few cases for his career firm, but often the majority for a brokerage firm.

This has caused many niche independent brokerage life insurance companies to change the way they get business. They offer unique specialty products to independent or semi-independent sales agents. Other insurers remain almost entirely career oriented while buying another insurer for distribution of independent contracted products.

With semi-independent and independent insurance representatives now representing more than 45% of the agent force, companies need to take note. As these agents tend to be the most professional, they currently underwrite almost 80% of the insurance premium written by all licensed life and health insurance agents.

While this does not indicate that the Kings of the insurance companies are totally dead, it does show that they had to change their tactics to stem the loss of market share. They can no longer captivate the activities of high-ranking producers, treating them like pawns with sub-par commissions. Companies still have hundreds of thousands of agents under their control. However, when only 8% of fully captive agents endure a 4-year duration, they certainly don’t earn bragging points.

Unless the kings of insurance companies can wisely increase better agent retention, they have to start forgoing more profit for agent training, actual leads, and higher commissions.

Today’s freelancers who survive the critical first few years quickly become smarter than the insurance company that hired them. The green grass of the dollar is certainly more abundant for qualified insurance representatives on the other side of the fence.