Do I Need an Insurance Agent?

By: Mary Steeb, CISR, CPIW

Mary loves to explain insurance in terms that her customers can understand so that they can make informed decisions about their coverage.

Insurance online insurtech business finance technology concept. Businessman using smartphone and computer to insurance online for life and family, property, health, car, travel, education, financial.

Millennials are twice as likely to buy car insurance, home or renter’s insurance online, compared to their Boomer parents. Here’s what the digital natives (and Gen X, to a lesser extent) may be missing…

Do I need an insurance agent? Why??

If you’re young enough that you can’t remember a world without the Internet, you’ve probably asked these questions at one time or another. Similarly, you may have wondered: Why does anyone need a travel agent? Or a piano teacher? Or a book store? Everything they offer can be found online… Right?

Okay, okay, before we go down the rabbit hole of seemingly obsolete resources, let’s clear up a few basic points.

What does an insurance agency do?

An independent insurance agency represents you (the client) in the process of shopping for the best coverage at the most competitive rates. This might include coverage for your car, your house, your apartment, condo, or business. “Shopping” isn’t even the best word for it, because insurance policies aren’t like products you can grab off the shelf. Still, it may help to think of an agency as a buyer’s assistant.

Independent insurance agencies have access to different insurance carriers. Really good agencies—like ours, here in Massachusetts—have relationships with dozens of different carriers, not just two or three. And some of these companies will only work with clients through insurance agencies. That means if you’re shopping for insurance all by yourself, online (which you shouldn’t do, by the way), you will miss out on some of today’s better options.

Using quoting tools, an agency can request “quotes” from multiple carriers, and then present these options for you to review and decide. In effect, an agency creates a competitive environment, wherein more carriers are competing to get your business. Ultimately, you get all the protection you need for the best possible price.

What do insurance agents do?

Quoting your new policy is a big part of the job, but it’s certainly not the only part.

Insurance agents do MUCH more than just gather price quotes. Yes, we understand your biggest concern is probably the price tag. After all, who has extra money laying around for something they hope they’ll never use? But insurance agents have the education and experience to help you understand all the different things that could go wrong—and why your cheapest option might not be your smartest option.

For example, lots of clients ask us: how much car insurance do I need? A big part of our job is explaining the difference between what’s legally required and what’s financially responsible to carry.

Insurance agents also help their clients file claims, make policy changes, and work with the different vendors who are involved in major purchases (e.g. car dealerships, banks, mortgage companies, etc.). If and when you need to use your insurance–after a collision or a water damage event in your home, for example–a dedicated agent is a valuable resource to have at your fingertips.

Finally, as your income and assets grow, your insurance needs will likely become more complicated. You may eventually own multiple homes. Or you may hire a nanny to care for your children. You might volunteer your time for a nonprofit, or serve on a board of directors. You might establish a trust or LLC. All of these scenarios introduce complex risks that should be addressed by a dedicated private risk advisor. Here’s more info for anyone who has outgrown mass-market insurance. If you’re in this boat, you definitely need an insurance agent.

When should you call an insurance agent?

Insurance agents are valuable advisors, year round—not just when you’re buying or renewing a policy. When things change in your life (e.g. you gain a new driver in your household, you build an addition onto your home, you get married, you adopt a dog, you retire, you start a home-based business, etc.), your insurance agent can quickly weigh in on how that change might affect your coverage needs. Use this list of 9 Reasons to Call Your Local Insurance Agent for more detailed explanations.

Why do some people not use insurance agents?

Some people claim that online insurance is easier or more convenient. Other people are lured by ads that promise big savings. We would beg to differ on both accounts. (If you want the full picture, here’s a closer look at choosing easy/fast” insurance along with a reality check for anyone seeking today’s best car insurance rates.)

Like most modern products and services, insurance is now available online. Younger consumers don’t mind shopping for it there. In fact, Millennials (ages 18-30) are more than twice as likely as other generations to buy their insurance online. If you Google “car insurance,” you’re almost guaranteed to see advertisements from The Big Four listed above organic results for local agents who live and work in your hometown.

If you opt to contact one of The Big Four, you’re not working with an independent agent. Instead, you’re probably working with a “direct writer” or a “captive agent.”

What’s the difference between a direct writer and a captive agent?

The difference is not exactly as cut and dry as this, but let’s try to simplify:

A captive agent only has access to one company’s products. (Say, for example, State Farm, AllState, or Farmers.) The agent might have an office in your neighborhood. You could go sit down with him and discuss your insurance, but you would have to buy your policy from the one option he has because he’s, well… captive. And now, so are you.

A direct writer also represents just one insurance company. (Think of all those quirky mascot characters you know from TV commercials: the Lizard, Flo with the apron…). You can reach a direct writer online, via 1-800 number, possibly through an app… But if you decide to buy insurance from him, you probably won’t deal with that same person again (i.e. you won’t have a dedicated agent). You also can’t guarantee you’ll be working with someone who is an expert in Massachusetts insurance. If you have questions about MA’s changing state laws and requirements, it might take a lot of proactivity on your part to find someone who can help you… And how will you know to ask the question in the first place? Additionally, you won’t get much help with Massachusetts RMV services (something our clients found very valuable during the recent pandemic.)

Direct writers and captive agents aren’t inherently bad options. But their loyalty lies with the one big  company that pays them—not with you and your best interests. If everything goes smoothly in your life, you may never have a problem with a direct writer or captive agent situation. On the other hand, many people do run into trouble when they file a claim, experience a rate hike, or wish to dispute something about their policy. Because they don’t have a neutral representative in their corner, things get tricky pretty fast.

This potential conflict of interests is one reason why many people prefer the independent agent model.

So, back to your original question… Do I need an insurance agent? In the age of the enlightened consumer, ultimately, it’s up to you. We think there’s a lot of value in working with someone who’s not only an expert in her field, but also knows you and your family on a first-name basis. If you think so too, we hope you’ll contact us!