Direct Writer

What Is a Direct Writer?

A direct writer is an insurance agent that only issues policies from a specific company. A direct writer, also called a captive agent, is tied to one provider, meaning that it is restricted in what products it can sell clients and is unable to shop around to secure them the best policy for the best price.

The term direct writer can also refer to the insurer itself.

Understanding a Direct Writer 

Direct writers are employees of a single insurance company. They are the opposite of independent agents, who are self-employed and make money from the commissions they receive from selling the policies of various insurance companies.

Direct writers sell all types of policies, ranging from homeowner insurance to health insurance to personal liability umbrellas. What they generally offer clients is the best plan at the best price within the options presented by the particular provider that pays their salary.

That means that consumers who choose to work with them are not guaranteed to get the best choice available from the entire market—unless, of course, that option happens to be the direct writer’s. A direct writer’s loyalty is to the insurance company, while an independent agent’s loyalty generally lies with the client. 

Direct Writers vs. Independent Agents

Direct writers were more common than independent agents until the 1990s. During that period, insurance companies began laying off thousands of their own agents in a bid to rein in costs.

Eliminating large chunks of these often-expensive networks left many out of work, paving the way for a rise in freelancing independent agents. These particular agents are not employed by any specific insurance company and instead have their own offices and pay their own business expenses.

For many, the proliferation of such figures is a good thing for the industry and consumers. Independent agents work on behalf of the policyholder, rather than the insurance company. That means they are more likely to have consumers back during a claims dispute and, by virtue of having no ties to one particular organization, are better equipped to shop around and find them the best deals.

Benefits of a Direct Writer

While not flawless, direct writers do deliver some notable advantages to clients. Perhaps most importantly, they are known to excel at providing an exceptional level of service, mainly because they typically have the freedom to spend more time on relationship building, fact-finding and general hand-holding. In an increasingly digitized insurance marketplace, those are the types of things that clients are sometimes lacking.

Dealing with fewer products and having close ties to a particular provider also means that direct writers are more likely to be clued in and have specialized knowledge. Independent agents work alone and sell a lot more policies. This wider remit could make it challenging to stay abreast of everything that’s available in the marketplace.

Independent agents aren't always completely objective, either. Insurance companies pay them a commission when they sell a new policy, and some of these payments are more generous than others, leading to potential conflicts of interest.

Finally, if clients obtain all of their insurance policies from the same direct writer they might qualify for a multi-line discount. Insurance agents struggle to offer the same incentives and will likely have more difficulty persuading companies to offer lower premiums to customers, particularly if their plans are spread out among numerous providers.

Special Considerations

There are many arguments in favor of a consumer choosing an independent agent over a direct writer when buying insurance, and a few that even run to the contrary.

In the end, it is worth bearing in mind that there are scrupulous and unscrupulous professionals within both of these camps. Some are good at their job and others aren’t, regardless of which category they belong to, so selecting one over the other when purchasing insurance is not automatically a good or bad choice.