The insurance industry is full of competition and options. Consumers have numerous channels through which to buy insurance, however, many consumers aren’t aware of their options and what they mean. In this post we will explain the three primary channels: direct, online, and independent.
The direct channel, also known as "captive agent" is a well-known channel to most consumers. Examples of the direct channel are State Farm, Farmers, Allstate, or American Family. The trait that sets this channel type apart from others is that these agents are only able to sell the products provided by their company; hence the name "captive agent". They are captive to the products and pricing that their company is offering without any other options available to offer to their customers. If you call a State Farm agent for a quote you will only ever get a quote for a State Farm product. The direct channel will only allow hired and appointed agents that solely represent their company to sell their products.
The online channel is beginning to gain more popularity especially with younger generations. Some examples of online channels include Esurance, Geico, or Root Insurance. The online channel is similar to the direct channel in the sense that the online companies are only able to sell the products provided by their company, however, the main difference between direct and online is that online companies sell everything through the internet and phone centers. The online channel allows consumers to purchase their insurance without ever needing to meet with someone or go into an office. As with the direct channel, consumers will only ever receive quotes from the specific online company they are working with.
The independent channel or often referred to as the "broker" channel is very different from the other two channels because the independent is able to offer products from a variety of companies, not just one. Some of the most well-known independent agent companies include: Travelers, the Hartford, Safeco, or MetLife. Independent agents have contracts with multiple insurance companies which allows them to quote a specific product with several companies to find the best rate for a customer. Independent agencies come in all sizes with hundreds of different names; there are one-man offices, small to medium sized businesses with dozens of agents and even large national businesses with hundreds of agents. Independents are able to better represent the customer due to having many insurance companies to work with, they are also less likely to be strongly affected by insurance carrier rate changes because they have other companies to work with.
In two weeks, we will review the advantages and disadvantages of the three channels. Stay tuned!