How Do Local Independent Insurance Agents Work?

The number of insurance agents will grow by 12 percent by 2018.

The growing field of insurance includes independent insurance agents, which are agents who represent more than one insurance company. These agents enjoy the freedom of shopping around to find the best rates for their customers. Their jobs can be difficult as they are required to know the underwriting standards of several insurers. Independent agents work in a variety of ways.

Contracting Insurance Companies

Independent insurance agents must sign contracts with one or more insurers. These contracts empower them to represent the insurance companies to existing customers and prospects. Under these contracts, the insurance agent agrees to produce a certain volume of new business for the insurance company. The insurance company will cancel the agent's contract if he fails to meet his production goal. To obtain a contract, the agent must interview with the insurance company, complete a formal producer's application and provide documentation showing existing success with other insurance companies.

Compensation

Independent insurance agents usually enter into commission-only wage agreements with insurers. Their commission is based on the total policy premium of the policies they sell. For instance, an insurance agent whose commission is 15 percent would earn $15 for selling a policy with a $100 annual premium. Independent agents may also partner with other agents to share commissions when they refer business. Commissions are paid when policies begin and when they renew.

Insurance agents may also receive bonuses or non-monetary incentives such as trips and gifts from the insurance companies they represent. These options are usually reserved for the insurance company's best producers.

Finding New Customers

Independent insurance agents find new customers in a variety of ways. While most insurance agents gain the bulk of their new business through referrals, they may also advertise, partner with auto dealerships for referrals and attend trade fairs to meet potential clients. Most insurance sales professionals are careful when seeking referrals as there are laws in place to protect consumers from unethical insurance referral practices. This includes regulations against rebating, which is the unlawful compensation of a customer for purchasing a new policy.

Overhead Expenses

While many independent insurance agents work from home, some opt for more traditional work environments. They may rent office space and maintain a paid staff. Their expenses include phone service, internet access, advertising, yellow page listings, monthly payments for lines of credit, continuing education coursework and more. These expenses may be shared by the insurance companies they represent.

Getting and Maintaining Licensure

Independent insurance agents must be licensed to sell insurance in the states they plan to service. Aspiring agents must complete prelicensing coursework and pass an examination for the lines they plans to sell. They must pass a background investigation that may include a check of criminal and credit histories. Independent insurance agents must renew their licenses as often as required by the state. The renewal process may involve the completion of continuing education coursework in a classroom setting, seminar or online.

References

• Bureau of Labor Statistics: Insurance Sales Agents