The better question is how much CAN an independent insurance agent make? Whether you’re thinking of making the switch from a member of the captive agents club to going it on your own, there are lots of important questions you’ll want answered. 

First and foremost: Can your earning potential match what you’re making as a captive agent? Better yet, can it beat it? If you’re starting out, are there advantages to one over the other? Whatever type of agent you are, captive or independent, there are a lot of factors that impact your earning potential, average salary, and commission rates. 

Since there are so many factors, there’s no one right answer for the million dollar question. According to the Bureau of Labor Statistics, insurance agents’ salary ranged from a measly $29K to a resounding $126K a year. How do you make sure you’re at the top of that statistical range instead of the bottom? 

You find out what’s worked for successful insurance sales agents and how ambitious agents work to stay ahead. That’s where we come in - we’ll cover ways to set yourself apart that will make sure your insurance agency succeeds.

Salary + Commission = How Insurance Agents Make Money

No matter what type of insurance you sell, which insurance carriers you partner with, or whether you call yourself an insurance agent or a broker, you all make money the same way. 

Salary, plus commission, is how agents typically earn their income. 

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Your salary keeps the lights on, but (just like every salesperson) commission is where the money comes in. Let’s take a look at a few distinctions that make the commission structure of an independent agency very important: 

  1. Base commission is paid to you, an independent agent, as your clients pay their premiums. Your commission is established with the insurance carrier based on insurance products sold. 

  2. Commission rates vary by insurance company and by products sold. Insurance companies may offer higher commission rates for less desirable products to incentivize insurance agents to sell those products. 

  3. Renewals may come with lower commission rates to incentivize new intake. 

  4. Contingent and supplemental commissions are additional commissions that can be arranged with the insurance carriers. 

  • Contingent commissions are not paid out when the policy is sold but, instead, when certain contingencies are met. 

  • Supplemental commissions can be additional commission rates applied to certain products by an insurance carrier for an agency. 

  1. Compensation disclosures are commonplace for agents to issue to their clients. These statements inform clients about any incentives you receive from insurance companies when selling or promoting their products. Your commission structure (whether it’s annual, per policy, or a combination) between insurance companies should be transparent if you wish to issue compensation disclosures to your clients. 

Commission is dependent on your agreements with insurance carriers, how much you sell, and how many clients you sell to. As an independent insurance agent, you make what you earn. That earning potential depends largely on what work you put into it.


Profit Margins May Vary

Your profit margin as an independent insurance agent will vary depending on several factors. Having those in mind and knowing what to expect will keep your goals attainable. 

  • Types of Insurance

There are mainstream insurance products (e.g. life and health insurance) and niche insurance products (e.g. avalanche or drowning insurance). There’s a market for both, but if you’re only selling niche insurance products, you’ll run out of demand for your supply. The more in-demand offerings you sell, especially if you’re selling a variety of them, the more potential for sales you have. 

  • Size of Agency

The volume of sales you’re making, who you’re selling to, and how often you sell insurance products has a huge impact on your profit. If you’re keeping up a healthy mix of new and recurring business, especially on a large scale, your profits are bound to reflect that business. 

  • Location

Your location and the location of the market you work in impacts your profits, too.  Consider the differences in the cost of living between a midwestern town and a coastal metropolis. That difference in cost of living affects pricing structures, inflation rates, and even how people spend their money. There’s also competition to consider. While insurance rates can be higher in more populated cities, the average rates are lower than their rural counterparts because competition keeps premium and policy prices manageable. 

Keep in mind that profit is as much about what you spend as it is about how much you make. Factors like operating costs, expenses, and changes in the costs of annual expenses all chip away at your profit. Keep an eye on how you’re spending your money, too.

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Captive vs. Independent

You may be wondering if you can make more as an independent agent than as a captive agent. If you’re contemplating the switch or deciding which direction your insurance career should take, money is a huge deciding factor. 

The answer is yes — you can make more money as an independent agent than as a captive agent. There’s a catch though: it comes with a lot more work and more risk. 

As an independent agent, your profits come with less security. Your salary is less, but the earning potential for your commissions is much higher. Considering that, as a captive agent, your overhead and risk expenses are covered with your insurance company, you get less of the potential for sales commissions and incentives. 

There are trades in everything. If you want to make more, you have to risk more. Staffing your own agency, weathering economic downturns, and managing your own marketing are all risks you take when you decide if you want to earn more. 

Simply put, there’s security to being a captive agent. A captive insurance agent’s salary is consistent, if not substantial. 

Independent insurance agents’ salaries are less consistent, but you have a wider selection of products to sell and a greater opportunity to earn. There’s limitless potential for whatever volume of clients you maintain.

How to Increase Your Agency’s Profitability

There’s a reason independent agencies are successful, when operated well. Consumer choice drives the market and nowhere is there more choice and power given to the consumer than in an independent insurance agency. 

With inflation increasing, prices soaring, and budgets tightening, buyers are paying closer attention to how and where they spend their money. Years ago, they might have paid for the convenience of getting their insurance from the same place they always have, in these past few years that’s changing. 

They’re shopping quotes, staying on hold, and asking questions about the raising of their rates. That’s where the independent insurance agent steps in. There are several steps to increasing your agency’s profitability, here are a few: 

Consider these tips when marketing yourself and your agency: 

  • The Value Proposition

Shout your value proposition from the rooftops. Whatever makes your agency essential to your clients is what you should be marketing. You’re offering convenience, time saved, and money kept. With an independent insurance agent, you’re doing all the work of comparison shopping and haggling so they don't have to. 

  • Renewals

It’s understandable to focus on lead generation and turning sales prospects into clients. That should be a portion of your business, but it shouldn’t be your whole business model. Not only are renewals more cost-effective (less costs associated with retaining clients than attracting new ones), the potential for growth is higher. As your relationship grows with clients, you can help them expand their coverage and gradually cover all their insurance needs. Just a 5% increase in retention can lead to a 25% increase in profits.

  • Make Your Data Work For You

From existing to potential clients, data comes pouring in through your website, social media platforms, and document intake. From demographics data to increase your marketing campaigns to contingency campaigns designed from visits to your website, make your data work for you. 

Regardless of what avenue you take, there are lots of small things that can have a huge impact on your profitability. Remember profit is about managing your expenses as it is about attracting business. Especially if you’re starting out on your own, you should know what goals are realistic when it comes to profits.

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Still Want More? 

If you’re doing all the work, plus putting in all the time, but you still feel like you could be making more, you’re probably right. 

As an independent agent, you’re used to going it alone. You don’t want to sacrifice your independence, but may need a little help. There’s a nice compromise in the form of a membership group like SIAA. 

As an independent agency, your biggest challenges are growth and access to markets. With a group like SIAA, those two hurdles are knocked out for you. Mentorship programs, networking and collaborative services, plus opportunities for profit-sharing on a nationwide level are all perks you can count on. 

Access to benefits like that will go a long way towards ensuring your profit potential. All types of insurance agents and agencies rely on membership and alliance organizations to continually grow and improve. 

By providing valuable support, mentorship and networking opportunities, a group like SIAA is your most valuable tool. In this age of brutal competition, sometimes it takes sticking together to maintain and improve profitability.

Don’t Hesitate, Start Now

Being an independent agent and having your own agency is no easy business. It takes high risk to achieve that high reward. Cliches aside, your earning potential and profits are based completely on the work you put into your agency. 

There is a lot of untapped earning potential out there. Frustrated and curious buyers are shopping around, looking for what’s right for them. As an independent agent, you’re their saving grace. 

That can be the scary part. After all, you have a nice safety net as a captive insurance agent. If you want more and you’re willing to do more, make the transition today. Check out this free workbook to learn what you should expect when making this transition, working with carriers, anticipating your initial profit margins and more.