What Is The Difference Between An Independent Agent And A Direct Writer?

Everyone has seen insurance advertisements that feature a lizard, a man who creates trouble and a woman in white trying to sell you insurance.  These ads may be entertaining, but how in the world can you tell these companies apart? What are the differences?  Is one company better than any other?  Will the coverage, price, and service meet my needs?

There are two distinct kinds of agents in the United States; Independent agents/brokers and direct writers. Let’s define these for you.

Independent Agents

An independent agent is a business that is owned and operated by local business professionals. Some larger agents may have a board of directors and many partners, but usually, the ownership is local and independent.  These agents offer many different insurance products through many different insurance companies.  Independent agents sell the products that most appropriately meet the needs of their clients.  Independent agents typically are very well trained and knowledgeable of the complexities of the insurance market and insurance law.

Most independent agents have multiple companies from which to shop your insurance needs.  This makes it more likely that they will find the exact fit for your specific situation. It also allows for greater competition, which benefits the client.

The goal of the independent agent is to provide the best possible combination of coverage, price and service.  For example, independent agents have experience in understanding what services insurance companies provide and are able to match unique services with client needs.  Not all insurance companies are alike.

Direct Writers

A direct writer is an agent who distributes policies for only one insurance company.  Examples of these companies include Farmers Insurance, State Farm Insurance, and Allstate Insurance.  Direct writers are agents paid by the insurance company and cannot utilize the entire insurance market.

If your roof needed replacement, would you go to just one roofer for a quote?   Would you hire a roofer because their ads are funny?   Wouldn’t it make good financial sense to go to more than one roofer to get options and pricing comparisons?

The value of the insurance you buy truly is established when and if you have a claim. Independent agents advise and help clients through the claim process.  Direct writers are working for the insurance company and may not always have your best interests in mind. 

As common industry phrase has been: independent agents/brokers work for the customer, direct writers work for the company. Enough said!