Independent insurance agents are often hesitant when bringing up captive insurance with their clients. While every agent has their reasons for avoiding talking about captives, the result of the silence has the same consequences—clients miss out on a valuable option that could offer more control and long-term savings.
At Captive Coalition, we’ve worked with more than our fair share of agents initially unsure about captive insurance. Our sole purpose is to provide education on captives so agents can best help their clients. As independent agents like you become more familiar with captives, you can better assist your clients' needs.
This article will cover the five main reasons independent agents refrain from talking about captive insurance and how these issues can be addressed with your clients. That way, you can confidently start offering captive insurance as an alternative.
One: Lack of Understanding
One of the most common reasons independent agents avoid discussing captives is that they simply don’t understand them well enough. Captive insurance can be a complicated subject that agents typically aren’t trained in. Traditional insurance models are what they know best, whereas the unfamiliar territory of captives can be intimidating.
Without a solid grasp of how captives work, independent agents may feel unsure about explaining the benefits and risks to their clients. After all, no one wants to come across as uninformed, especially when dealing with a client’s financial security. This lack of confidence keeps many agents from even mentioning captives as an option despite the potential advantages.
How to Address Captive Insurance: Independent agents can benefit from clear, accessible training on captives. With the right resources in place, they can confidently explain the advantages and risks of captives, helping clients make informed decisions that suit their unique needs. This approach builds trust and positions the agent as a knowledgeable partner, guiding clients through unfamiliar territory with greater ease.
Two: Fear of Risk
Independent agents often hesitate to bring up captives because of the perceived risk involved. Captive insurance requires clients to take on more financial responsibility upfront, and agents worry that clients might not be ready for that level of risk. In fact, the first year of joining a captive often comes with higher costs due to the need for collateral.
Many agents avoid captives to protect their relationships with clients. They fear that if a client faces unexpected costs or a bad experience, it could harm the trust that has been built. No agent wants to recommend something that could blow up in their face. Captives—when not fully understood—seem like a risky gamble.
How to Address this Issue: Agents can focus on educating clients about the long-term advantages of captives. While upfront costs may be higher, captives offer significant savings and increased control over time. By explaining the long-term benefits, agents can help clients see captives as a strategic option, easing concerns about the perceived risks and helping them feel more confident in their decisions.
Three: Losing Clients to Competitors
Another primary reason independent agents hesitate to discuss captives is the fear of losing clients to competitors. In a crowded insurance marketplace, agents worry that if they introduce the concept of captives, clients might turn to another agent or firm that specializes in captives.
Even worse, agents risk losing credibility if a competing agent or agency brings captives to the table before they do. Clients may wonder why the person they currently work with didn't offer captives as an option earlier, which can lead to issues in trust. The fear of being outpaced by competitors keeps many agents from talking about captives.
How to Address This Issue: Proactively discussing captive insurance allows agents to take the lead before competitors do. By introducing captives early, agents can demonstrate their expertise and offer clients valuable solutions, strengthening relationships and building trust. This approach helps position agents as knowledgeable advisors, ensuring clients don’t look elsewhere for answers.
Four: Misconceptions About Captive Insurance
Many independent agents believe captives are only suitable for large corporations with massive insurance budgets. This misconception leads them to overlook captives as an option for smaller businesses, even though captives can benefit companies with lower insurance premiums.
Note: Businesses spending at least $250,000 in their insurance premium can qualify for captive insurers.
Captives come in different forms, and not all of them require the vast resources of a Fortune 500 company. Options like cell captives and group captives allow smaller businesses to pool their resources and share risks, making captives a viable solution for many more businesses than independent agents realize.
How to Address the Misconceptions: Captive insurance isn’t limited to large corporations. If agents understand the different captive structures—such as cell or group captives—they can confidently present options that fit businesses of various sizes and industries. This broader perspective allows agents to highlight captives as a viable solution for a wider range of clients, expanding their potential reach and value.
Five: The Money Factor
Money plays a big role in why independent agents don’t talk about captives. Traditional insurance commissions are more straightforward, with agents earning a percentage of the premium their clients pay. Captives, however, operate differently. Agents may worry they’ll lose income by moving clients into a captive, as the structure can reduce agents' commissions. Most captives ask the agent what commission they want to be paid. This is typically a percentage of the premium and billed quarterly along with the premium. It should be noted that captive insurance lives in transparency, which means every dollar is accounted for and visible to all involved.
Additionally, some agents rely on contingency payments, which are bonuses paid by insurance companies for keeping losses low. Since captives involve a different compensation structure, agents may be reluctant to make the switch, fearing it will impact their bottom line.
How to Address It: Weighing the long-term benefits of captives against immediate financial concerns can reveal new opportunities for agents. Captive insurance may lead to stronger client relationships, improved retention, and increased business. By emphasizing the value captives provide—such as transparency and control—agents can position themselves as trusted advisors, ensuring that financial concerns are addressed while also providing clients with a sustainable insurance solution.
Will Captive Insurance Work for Your Clients?
While agents often avoid captives due to uncertainty, risk concerns, or financial considerations, gaining a better understanding can help provide clients with a valuable solution. Captive insurance offers greater control, transparency, and long-term cost savings, making it a strong option for the right clients.
For a deeper understanding of captives, read our Captive Insurance 101 guide. If you're ready to explore how captives could fit your clients, schedule a call with Captive Coalition to connect with an insurance consultant.
