What it means
Insurance can be sold in two main ways, and the difference affects how much choice a customer gets. A captive agent works for a single insurer and sells only that company's products, while an independent agent has agreements with several insurers and can compare options for the customer.
Independent agents and brokers are the members this association represents. The advantage for a customer is choice.
An independent agent can shop around among insurers for car, home, business or liability cover and recommend the policy that fits best. This can matter to a small business with unusual risks that one insurer may not cover well, such as a company that stores valuable stock or operates specialist equipment.
The association works at both state and national levels. It follows legislation and regulation on matters such as licensing, commissions, disclosure and consumer protection, and it argues for rules that support independent distribution.
It also offers training and professional programmes, which help agents keep their skills up to date. Agents and brokers earn money mainly through commissions paid by the insurer, and sometimes through fees paid by the client.
A broker traditionally acts more for the buyer in arranging cover, while an agent traditionally represents the insurer, although in practice the roles overlap. Customers can ask how their adviser is paid so that they understand any possible bias, and good advisers will answer plainly.
For a business owner, the association is useful as a sign of professional standing. An agent who is active in a recognised industry body is likely to follow its standards, though membership alone does not prove quality.
It is always worth checking licences, claims handling reputation and the financial strength of the insurers involved. Technology is changing the field.
Agents still act as the point of contact when a claim arises. Many customers now compare quotes online, and independent agencies respond by emphasising advice, claims support and knowledge of complex risks, which are harder for a website to replace.
In practice
Real-world examples.
Example
A small bakery needs cover for property, liability and staff injuries. An independent agent gets quotes from five insurers and finds a package that costs $4,200 a year. The bakery owner would have paid more had she called one insurer directly. The agent also explains what each policy excludes.
Example
A state government considers a rule that would change how commissions must be disclosed on commercial policies. The association submits its views, arguing that clear disclosure is helpful but that complicated forms would raise costs. Lawmakers revise the proposal. Members are told about the change through the association's bulletins.
Example
A young agent joins an independent agency and uses the association's training courses, webinars and study materials to prepare for professional exams. The qualification helps her advise clients on more complex commercial policies. Within two years she is managing her own list of business clients.
Case study
Seen in the real world.
Cedar Point Insurance Services is a fictional independent agency with eight staff and relationships with twelve insurers. A local trucking firm asked it to find cover after its previous insurer withdrew from the market.
The agency approached six insurers and found three willing to quote, since the others considered the business too risky. It prepared a one page comparison for the owner. The cheapest quote was $96,000 a year, and the one with the best claims service was $108,000.
In this illustrative case, after comparing the written quotes side by side, the trucking company chose the $108,000 policy because the extra $12,000, or 12.5%, bought faster claims handling and a higher financial strength rating. The agency earned a commission of about 10% of the premium, which it disclosed to the client in writing. The trucking firm renewed the policy through the agency the following year.
Watch out
Common mistakes.
- Assuming an independent agent always finds the cheapest policy, when price is only one factor alongside cover, exclusions, claims service and the strength of the insurer.
- Confusing an agent with a broker, when the two roles differ in whom they traditionally represent and in how the law treats them in some states.
- Never asking how an adviser is paid, when commissions can influence recommendations and a different fee arrangement might suit you better.
Questions
People also ask.
What is the Big I?
It is a nickname for this association, which represents independent insurance agents and brokers in the United States.
What is an independent agent?
It is an agent who can sell policies from several insurers instead of just one, which lets them compare options on the customer's behalf.
Does the association sell insurance?
No. It represents and supports the people who do, and it does not set the prices of policies.
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