Is the term “independent agent” an oxymoron? After all, youcan't buy insurance from just any carrier when you enter anindependent agency office–only from those insurers the agentrepresents. Is that fact made clear to prospects walking in thedoor, or to clients who stick around over the years? And in thesetimes of full disclosure, should these inherent limits on carrierchoice be automatically revealed to all who do business withagents?

This conundrum first struck me back in late April, in my firstface-to-face meeting with J. Robert Hunter, insurance director ofthe Consumer Federation of America. We had been talking about thecontroversy over contingency fees, and the problems posed byinsurance producer compensation.

That is an argument to be continued on another day, but for now,I would like to focus on the point Mr. Hunter made about thefundamental relationship independent agents have with theircarriers–contracted to work only with selected insurers, andcertainly not representing all companies at any given moment.

“Agents never explain to their clients that they are tied to afinite number of companies, and that there might be others outthere with better prices, coverage or service,” he noted, addingthat “most consumers don't have a clue” about this fact ofinsurance life.

This situation in and of itself sets up conflicts of interest,according to Mr. Hunter. He argued that an independent agent who isasked about TV commercials run by Carrier W, but who onlyrepresents Carriers X, Y and Z, is going to sell the prospect on X,Y and Z, even if W might be the best fit for that particular buyer.The same would hold true if the prospect walked into an agencyrepresenting Carrier W, curious about what X, Y or Z had tosell.

Of course, an independent agent offers far more options forconsumers than captive agents or direct writers, who represent oneand only one carrier. But Mr. Hunter's point was, what if thecarrier with the captive agency force has the best price? Would theindependent agent ever refer them across the street? Not likely.Thus, the inherent conflict of interest.

Should the consumer be made aware of these dynamics as part ofstandard disclosures, both in terms of what they gain by workingwith an independent agent, as well as what they might belosing?

If so, the same standard should apply to captive agents anddirect writers. They should disclose to clients that they representonly one insurer, are not able to place business with any othercarrier, and warn insureds they could be left up the creek if theone company the captive agent represents decides to cut itsexposure in a particular market, or take a hike altogether.

What do you folks make of all of this?