The Benefits and Costs of Having an Insurance Agent

by Kevin on March 6, 2009

A few days ago I told you to ignore car insurance marketing pitches. One reader, Finance Nerd, commented:

The benefit of an agent is not that they know your situation inside and out, it is that they are more likely to have your back if the insurance company denies your claim, or tries to lowball you. At least that is a common argument, but I have no idea whether it is true.

For example, if you use GEICO and have a questionable claim, you don’t really know anyone who you can ask to make an exception, or give you a break.

But, if you have an agent, he may value your business enough that he will go to bat for you with the carrier.

According to this argument, cutting out the middleman may be cheaper up front, but may cost you more if you ever have a claim.

First, I wanted to thank Mr. Nerd for the great comment. I need readers like him to come and continue the discussion based on the posts I write. So thanks!

Second, I thought this was a great comment to base an article off of. Simply put I disagree with agents being this huge benefit. I’ll try to remain unbiased as this gets fleshed out.

I will also focus on car insurance for a few reasons:

  • Everyone who has a car has car insurance (or should since it is a law in most states)
  • There are more car owners than home owners
  • I have more experience with car insurance than homeowners or renters insurance (and I want to keep it that way!)

The Benefits of Having a Car Insurance Agent

As Finance Nerd noted there are some benefits of having an insurance agent.

  • The agent gets to know you and your family really well. She can get to know your personal situation really well to make sure you have the correct coverage.
  • The agent can go to bat for you if you have a problem with the company. Claim not moving fast enough? The agent can step in and make a call for you to a claim center supervisor.
  • You have someone to call that can provide you professional advice on the topics that agent is specialized in. Don’t understand investing, liability limits, or annuities? The agent can answer those questions for you.

While all these seem well and good, I respectably disagree.

The Costs Associated with Having an Agent

To the above benefit points…

The Agent is Paid By You

The agent wants to get to know you as well as possible to develop a rapport with you. He may be a perfectly nice person, but at the end of the day his paycheck comes from your pocket. Read that again. The agent is paid out of your pocket. The agent is a cost to you. His office. His furniture. His assistant. His utility bills. All of these come out of your premium payments.

Thus, he wants to get to know you so he can sell you additional products. Those products provide more income for his firm, and more income for him. Out of your pocket.

This goes with the first and third benefit points above. Additionally that expertise, while nice, is eventually going to result in you buying additional products from that agent.

Can Your Agent Really Help You?

To the second point, I offer some of my meager professional experience. I used to work at a car rental company. The biggest one. I’ve seen more than my fair share of customers whose cars were in the shop due to a wreck (in fact a majority of our business was insurance business).

You can imagine the number of very unhappy customers we encountered. Many of them had to come to us because other people hit them and they were having to deal with that person’s insurance company. In these instances, your insurance company (agent included) isn’t of much use to you. Sure, you could have a complex issue and your carrier might call the other carrier to get the ball rolling for you. But I highly doubt your agent would make the call. Likely it would be someone from the claims center.

But what if you hit someone else? That goes on your insurance. Surely your agent can help you then. Right?

In my experience, not really. There are exceptions to every rule, but I rarely heard of someone storming off to their agent and the agent making the claim move really quickly. The fact of the matter is sometimes you simply can’t make the claim move faster. Sometimes parts get delayed. Sometimes shops run behind. In these cases an agent might be beneficial… but I just don’t buy it.

Readers… agree? Disagree? Comment.


Ricky March 6, 2009 at 9:43 am

I too work for the largest rental car company in the world and I agree with you. The agent has little or no influence when it comes to expediting a claim. They may help you file your claim or go so far as to do all the leg work for you. But they are not doing anything that you don’t have the ability to do yourself. If having someone that you can meet in person for help with your insurance needs is important to you, then maybe it is worth the extra cost. When I was single, I did business with a major direct to consumer insurance carrier because they were by far the cheapest. When I got married and bought a house the best deal I found was through a carrier with an agent in my community. So right now I have an agent because it was the best deal I could find. However, if I find a better deal in the future with a direct to consumer carrier or another agent, I have no problem with switching again!

the weakonomist March 6, 2009 at 10:30 am

I’ve never filed a claim so I can’t speak about how good they are, however I can speak to the cost/benefit.

Insurance guys don’t hurt you, so if you don’t have to pay extra for him then go with a company that has a “guy”.

When I was shopping around for insurance, Allstate had the cheapest rates. Cheaper than all the “direct” folks.

Finance Nerd March 6, 2009 at 11:15 am

Disclaimer: I do work in insurance, but as an actuary not an underwriter, agent or claims adjuster. However, I have no direct experience in this particular question, I am just sharing the things I have heard over the years.

That said, I think there may be a difference between a dependent agent (sells for only one company) and an independent agent (sells for multiple companies).

A dependent agent, such as one for AllState, State Farm, etc. probably can’t do a lot to help you, especially in terms of things you can’t do yourself. The carrier knows they have no other options, unless they want to give up their whole contract, which is unlikely.

Things may be different with an independent agent. If I was an independent agent, and I had one carrier that was either slow, unhelpful or whatever, and it was starting to cost me business, I would either drop that carrier, or at least let them know. This gives the agent a little more leverage, so if he calls on your behalf he might have more success than you. His risk of leaving, and taking a whole book of business, not just your policy, with him may be high enough to get someone moving.

Note, though, that I am NOT talking about run-of-the-mill everyday claims. You can likely handle those yourself. I’m talking about that one claim out of a hundred that has a little wrinkle to it, where maybe the carrier is trying to deny coverage, lowball you, or whatever. In that case, I could see the independent agent having a little more pull, and maybe being able to help you out. Is that worth paying more for? That’s up to each person to decide for themselves.

I would also bet this is more true of more complicated lines of insurance, such as if you own a small business, as opposed to commodity products like home or auto.

As I said, this is just the argument I have heard over the years, but I’ve never personally been in the situation where it mattered to me, so I don’t know how true it is.

Kevin March 7, 2009 at 1:04 am

@Ricky: Glad you agree. Was curious about your opinion!

@the weakonomist: Very true. If the cost is lower regardless, then hey, switch. But its when those costs creep up — or if they sell you more products — that you have to be careful.

@Finance Nerd: Thanks for the different perspective. Always open to new takes on things. Good points about the independent agency.

David March 12, 2009 at 12:08 am

We used to have an OK agent when we lived in CA, but we have a great State Farm agent now, and their office is right down the street. They’ve been very helpful when we needed changes to our policies, and it’s nice to talk to a human “in the flesh” when we need something done. Great article.

Kevin March 14, 2009 at 3:04 pm

@David: Have you shopped around recently? Obviously each situation is different, but I just shopped around and found a better deal with a different insurance firm than my current one. Going to call my current company and see if they can beat it.

Mike M February 13, 2011 at 2:03 pm

One thing I didn’t notice here is the millions of dollars that GEICO or other similar companies spend on advertising. Seems like everyother commercial today is about insurance. Some companies would rather pay a local rep which adds to your local economy rather than farming out your money to some large company that is stealing jobs from hard working Americans and sending them to Canada or overseas. While I believe it is important to have a fair price for insurance, have you ever read your insurance policy from cover to cover? Does it cover mold? What about if my daughter gets in a fight at school and the parents try to sue? What if I have too much to drink and hit someone does the insurance company put a limit for vicarious incidents? I doubt a rep at GEICO is going to know that without being put on hold while “I check with my supervisor”. Buying insurance is not like buying milk, what you get isn’t what you always pay for. I would beware of the lowest priced insurance. You don’t always know what your getting into until you have a claim.

Danny Snyder April 25, 2012 at 8:54 am

Kevin, Kevin, Kevin, you are an insurance agent’s hero. You know very little of what you speak of. While you have a couple things correct, you will be burned in the long run. See….buying insurance is a marathon, you will be buying insurance your entire life. Insurance underwriting, rates, and companies are ever changing. What you buy today and how you buy today effects your premiums for years to come. Claims you make today, effect your premiums for years to come. I don’t know what agent you have been dealing with, unfortunatly you have not found a very good one. The mistakes in purchasing simple auto coverage by the general public, are too numerous to list here. I have customers that pay less for 10 times the coverage, than people such as you, that go out and by a Geico, Progressive, or Esurance policy. It’s really sad. Most are in denial, just like you. As for other products, maybe like life insurance. Buying it is you’re choice, not the agents. I have never sold the first policy, thinking about the money I, am going to make. Do thousands of agents do that….sure! I proved the proper information, to help clients make knowledgable, well informed decisions. There are thousands of dollars wasted because people think they can buy it cheaper, if they would just listen, I can teach them how to get really low rates. Yes, I know there are exceptions to every rule, but they are few.

Kevin April 25, 2012 at 7:40 pm

I’d love for you to bring unbiased facts to this argument, but I haven’t seen it thus far. You don’t specifically counter-point any of my arguments, and instead speak in the clouds about “future buying” and “the mistakes are too numerous to mention”. I guess wishing for a well structured argument in return is being in denial too?


It’s a car insurance policy. We’re not talking about breaking down a massive estate and how to cover it just so.

Yes, the claims you file today have an impact on your premiums for years to come. Everything goes on your CLUE report. I don’t recall saying that claims didn’t impact future rates.

Yes, you can make a mistake by buying the *cheapest* policy… but not the *least expensive*. Cheap does not equal inexpensive. Cheap can mean minimum coverage, which, in the long run will burn you. Inexpensive means appropriate coverage for your situation at the lowest cost.

And if you’re about to mention bundling, that’s not always a wise choice either. You’re less likely to shop around after you buy a bundled policy, which means today’s great deal might make you miss tomorrow’s better rate.

And in many cases, the lowest cost does not come in the form of a policy from an agent. Can it? Sure, but the odds are stacked against. I’d love for you to provide some data on how you support your book of business while still giving rates that are significantly less expensive than going directly to an insurance carrier. Is your office space free? What about your secretary? And I guess you volunteer your time instead of being paid? If not, where does the revenue come from to pay for these things? From the lowest cost insurance you sell? Or is it uncompetitive when priced against direct quote carriers and some of that extra cost goes to support you and your family?

I would also like examples of how, during a claim, you have been able to significantly move the process along faster than the customer would have the ability to by reaching out to people at the claims center (not that the customer moved that fast, just that they have the same opportunity to call).

CourtneyQueenie July 16, 2014 at 9:23 pm

I work in a claims call center, I get calls from agents all of the time, most times from my experience there are two types of agents.

The agents who care about their customers, know those customers and will bend over backwards for them. These agents are delightful to work with, however they have no ability to expedite anything.

And then there are the agents who see every customer as a paycheck, they don’t give two sh*** about the customer, they push the claims rep for speed because their time is more valuable than yours and they demand things and often lie to the customer to avoid the heat when the customer does not get what they want.

In both cases the agent has little to no power. In my experience all an agent is useful for is making a claim on your behalf and checking on its status.

In my personal opinion agents are money pits, and if you’re willing to be understanding of a claims rep in any small hang up of a claim we really are trying to get it fixed for you. A good claims rep is cheaper and better than an agent in some cases.

Loralyn Gallant July 3, 2015 at 10:02 am

Yay! Courtney & Kevin. From the horse’s mouth. I’ve carried insurance for years. I have had the same agent for 14. I have never experienced ANY ADDED VALUE from the agent. I check my policies and have to call them to have them CORRECT errors in my policy – like when they charged us for a car we didn’t own for TWO years. I called the agent and he said, “Well you never turned in the plates.” And I’m like wha— ? He said it’s not in the DMV. I said, look again. Then he said – oh – there it is, I see. Then they took it off the policy and sent a corrected policy. JEEZ – If I didn’t look at it, we would have just blindly paid it? Now I have to go back through all my records to make sure we didn’t pay them too much. On other ocassions, I’ve called about plates & such – their answer is for ME to Call the Carrier! Wha— ? This past winter we had ice damn damage. Again, the AGENT had me call the carrier directly who was great. I’m like – WHY do I have an agent? I am done with agents. Waste of my time & money. I am calling Courtney next time.

My only question is how can I ensure that when I am calling a claims rep that I am not getting an inexperienced off-shore person who doesn’t speak my language well? I would prefer state-side rep, in part, to encourage those jobs in the US.

Gena May 20, 2015 at 11:09 am

I know I’m a little late to the party, but I was doing some research for an upcoming seminar as to the pros and cons of having an agent versus dealing with a direct carrier and ran across this great conversation thread. I am an insurance agent for one of the top providers in the nation backed by the number one financial institution in the world. As did Kevin, I will try to remain unbiased as I delve into some of the statements made in response to Danny Snyder.

1) “It’s a car insurance policy. We’re not talking about breaking down a massive estate and how to cover it just so.”
–You’re right. It is a car insurance policy. Consider for a moment liability issues that arise. Driving a car is the most dangerous thing that most people will do. Your car insurance is designed not only to protect others from you, but you from others. Most people also, in my experience, have no idea how their car insurance works and don’t find out until they need it. Even if you remain with an agent, everyone should have an agent at least once that will take the time to explain what all of the coverage options are and how they work when used appropriately. For example, drivers with minimal liability limits are probably spending money on Uninsured Motorist protection that will not work for them if needed, simply because they didn’t know to request Added-On, instead of Reduced By. I meet customers everyday who have been wasting money this way and would have continued had they not had an agent explain the difference and present the option. Having an agent is having a knowledgeable advocate. Knowledge is power. and power-in this case-could mean ultimate savings and savyness.

2) “Yes, the claims you file today have an impact on your premiums for years to come. Everything goes on your CLUE report. I don’t recall saying that claims didn’t impact future rates.”
–Interestingly enough, while claims do impact future rates, some have more effect that others. My customers are encouraged to contact me or my team before calling the company to file a claim. We take the time to go over their options with them to determine if filing a claim is in their best interest. Often times a claims customer service rep will not be able to assist a customer unless they file a claim and it is often frustrating to customers to go through the process to find out either that they were not covered, or that the damage the claim will do their rate is not worth filing the claim. As an agent, I am able to go to my contacts within the claims department and pose hypothetical situations to get the answers my customers need in order to make the best decision for them. That is the power of having an agent–we enable our customers to make intelligent insurance decision.
–Also claims are not the only things that negatively impact your rate. Most people are surprised to find that rate-shopping or jumping from company to company also has a negative impact on your rate. Insurance companies provide better rates to customers that tend to stay with their carrier for 3 or more years. The longer you were with your last carrier, the better rate you get. So the best thing you can do, is find a company you trust and stay until either the rate becomes unbearable or a service issue prompts you to switch.

3) “Yes, you can make a mistake by buying the *cheapest* policy… but not the *least expensive*. Cheap does not equal inexpensive. Cheap can mean minimum coverage, which, in the long run will burn you. Inexpensive means appropriate coverage for your situation at the lowest cost.”
–This is true on the surface. The deeper truth is that having the appropriate coverage for your situation is a daunting task. Most people are not well enough versed in the insurance industry and law to know exactly what they need. I run across as many people that are over-insured as under-insured. People who are over-insured often have redundant coverage that they pay for and will never use, while under-insured customers have not considered protecting investments under their liability limits as well. Having agent that you know and trust who will provide opportunities for policy reviews at least once a year, will enable a customer to make adjustments to their coverage and limits as their lifestyle changes because your insurance policy should always fit your life like a second skin. As you evolve, so should you coverage. In effect, you do want the best coverage for your dollar, but an insurance specialist/agent can help you determine what that looks like for you. And, the best thing is, if you can find that some place else, at least you became a more intelligent consumer.

4) “And if you’re about to mention bundling, that’s not always a wise choice either. You’re less likely to shop around after you buy a bundled policy, which means today’s great deal might make you miss tomorrow’s better rate.”
–I have customers that come into my agency one policy at a time and that’s okay. We don’t push for customer’s to bundle. But when they realize that bundling may save them up to 15% on both policies, most of the time, they will inquire about bundling. Your comment is good advise for the customer who only cares about price–sure, leave the door open for future small dollar savings. But it is not good for the consumer that has found a company they believe in and an agent that they trust. This combination may cost you more in small dollars, but protect your current and future finances in the event of catastrophe. Bundling does secure the bond between company and client more than not, but once again, if you’ve found a company you believe in and agent you trust, why wouldn’t you bundle?

5) “I would also like examples of how, during a claim, you have been able to significantly move the process along faster than the customer would have the ability to by reaching out to people at the claims center (not that the customer moved that fast, just that they have the same opportunity to call.)”
–I agree with the sentiment that agents are not often able to get the claims to move along faster than a customer would on his or her own. I have however, had occasions where speaking with the claims adjuster, I have been able to provide information from our agency files (with the customers’ consent) that helped speed the claim along. Also, if the adjuster is having difficulty in reaching the client, we have often been able to reach the client and get the necessary information connect them to the adjuster as we often have multiple points of access for a customer that we don’t divulge to any one else including company reps without the customers consent. Ultimately though, I’m not doing a single thing that my customer couldn’t do. I’m simply doing taking the things off my customers plate that I can. As the agent, I understand that using your insurance entails more than dealing with a claims adjuster. It also means dealing with they tangible and intangible inconveniences and damages to the customer’s life. My job as the agent, is to handle as much as I can on this end so that the customer is free to handle life on their end. Again, it’s not that I’m doing something you can’t. It’s just that you didn’t have to, because I did.

All of that said, insurance choices should be made on what is more important to you as a consumer. Having a good direct provider is better than having a bad/incompetent agent and could be less costly. However, having a good/knowledgeable agent can be better than having a good direct carrier in that you have an advocate you can learn from and who will take as much work off your plate as possible when you need him or her. You may pay a few dollars more for that latter but when you are in need, you will be glad you did.

Loralyn Gallant July 3, 2015 at 10:13 am

Gena, you sound like an agent worth the money. I had a fender bender last year and when the agent told me to call the carrier directly, I experienced exactly what you explained. The rep couldn’t tell give me information until I filed a claim. So, I filed the claim, got the information, and decided it wasn’t worth the hit to my policy as I would pay more than the repair. So I cancelled the claim. Why couldn’t my agent tell me this? How do I find a good agent?

Gena May 20, 2015 at 11:30 am

please forgive the typos in my previous response.

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