This is part 1 of a two-part series about agents going independent, focusing on what captive agents must weigh before taking the leap
For captive insurance agents frustrated by commission cuts, shifting underwriting appetites or tighter corporate controls, independence can look like an obvious escape route.
Agency leaders who have made the transition said that the move can unlock greater revenue, freedom and control, but it can also leave an agent starting from zero, without premium, commissions or the infrastructure previously provided by the insurer.
Dan Garzella, founder and CEO of Garzella Group and Darkhorse Insurance Brokers, spent 10 years as a Farmers Insurance agent before moving into the independent channel. He had built a top-performing agency with nine employees across five states, but a change in carrier strategy undermined the commercial property practice he had spent years developing.
“I had spent four years building a successful practice around this large property business. Now, through no fault of my own, I couldn’t write it anymore,” Garzella said.
The experience exposed one of the captive model’s central vulnerabilities: an agent’s growth, compensation and product strategy remain tied to the decisions of one insurer.
“What became very apparent to me was that, when you’re in the captive world, you’re basically there to please the captive company and follow its business direction,” Garzella said.
That lack of control may be the trigger, but Keith Captain, president of FirstChoice, a MarshBerry company, said agents need to distinguish between an emotional reaction and a commercial decision.
“Some people are saying, ‘My commission is getting cut, so I’m just going to start a new agency.’ That’s an emotional decision. It’s not a business decision,” Captain said.
The first question should be why the agent wants to leave and what kind of agency they intend to create. That choice affects capital requirements, staffing, technology, carrier relationships and the type of business the agency pursues. The distinction is especially important for agents who do not own their books. Captain contrasted their position with Nationwide’s transition of agents into independence, where agents received their existing books and entered the channel with revenue already flowing.
Captive agents may also underestimate how much operating support their carrier provides. “In the captive world, the company handles all your accounting,” Garzella said. “A lot of branding and marketing is also taken care of for you in that world.”
An independent founder must then select systems, reconcile commissions and take responsibility for licensing and compliance. Captain said the economics can become challenging before renewal revenue compounds. An agent writing $500,000 in new personal lines premium might generate around $70,000 in first-year commissions, he estimated; this would be unlikely to support the owner and one or two employees after operating costs.
“You have to have enough money set aside, potentially hundreds of thousands of dollars, to cover your expenses,” Captain said. “You need to be able to live without a paycheck for a couple of years while still paying your staff.”
Garzella approached the decision as a planning exercise. He calculated monthly expenses, assessed the sales activity he could transfer from the captive business and estimated how his close ratio might change with access to multiple carriers.
His average close ratio rose from around 15% in the captive model to roughly 50% after he became independent. “I thought, ‘Okay, I think I can triple my revenue with the same level of effort,’” Garzella said.
He initially planned to buy an independent agency to secure an immediate revenue stream, but none of the opportunities worked out. He ultimately started again from zero.
“There are no guarantees, but you should have enough of your own internal data to become comfortable with making the move, as long as you plan,” Garzella said.
On other hand, some agency owners said the switch cost less than they anticipated. James Jenkins, CEO of RiskWell, spent around $30,000 before launch and believed the agency could have opened with about $10,000 if necessary. Don Ferlazzo, owner of Foursurance, said many expenses were similar to those he already carried as a captive agent.
The attraction of independence is not only the ability to offer clients more choices. It is also the potential to build a more valuable and resilient business.
Ferlazzo said independence removed the restrictions of working with one carrier. “It’s allowed us to provide more options to more people and grow substantially more in half the time that we did as a captive agency,” he told Insurance Business.
Jenkins estimated that revenue from the same hypothetical pool of accounts could be more than six times higher in the independent channel. RiskWell replaced six years of captive agency revenue within 17 months.
Garzella said the independent model also changed the balance of power with insurers.
“In the captive model, you’re there to please the carrier,” he pointed out. “When you shift to the independent world, the carriers are there to compete for your business.”
That shift can allow an agency owner to pursue new specializations, select the markets that best fit a client and change strategy without waiting for approval from a single carrier.
It also means the owner carries responsibility for every decision. The freedom to pursue almost any market or line of business can be an advantage, but only if the agency has the discipline to remain focused.
The emotionall signal for Garzella came when he no longer felt inspired and believed he could not grow in the direction he wanted. The business signal came when he had enough data, capital and confidence to see a plausible path through the early years.
Even then, the fear remained. “I was a top-five Farmers agent in the nation,” Garzella reflected. “Even with that level of success, there was still a very high level of fear about what would happen if I started this and failed.”
His major regret was waiting; he now believes he was probably ready around year six or seven.
For agents weighing the same decision, Garzella said the process should begin with a clear vision rather than a reaction.
“You need to ask yourself, ‘What am I committed to?’” he said. “Have a vision for where you want to grow in the future. Look at your options and determine which is the best option to get you there.”
