Should I buy a captive insurance agency or an independent brokerage?

An agency tied to one insurer and a brokerage that places with several can look alike from the street. They are built differently underneath. The main question for a buyer is who really holds the relationship: the client, the agency or the insurer. The answer shapes what you are buying, so ask for it early and in writing rather than relying on how the business describes itself.

Who holds the client book

Ask to read the agreement between the agency and its insurer or insurers. It should say who owns the client records and what happens to them if the relationship ends. In some arrangements the agency owns its book, in others the insurer has strong rights over it. Do not assume. Have your lawyer read the clause before you rely on the client list.

Dependence on one carrier

A captive agency has one main source of products and one main counterparty. If the insurer changes its terms, its appetite or its products, the agency has little room to move. An independent brokerage can shift business between carriers, though it still depends on its few biggest relationships. Ask what share of clients sits with each insurer, and what the agency would do if one stepped back.

Product range and approval of a new owner

A wider range lets a brokerage serve more of a client’s needs. A captive agency may offer fewer products but with deeper support and training from its insurer. Ask whether the insurer or insurers must approve you as the new owner, what they look for, and how long it usually takes. Read how a brokerage earns its revenue as well, so you know where income comes from.