Insurance Agent, Insurance Broker – What is the difference?

What is an Insurance Agent?  What is an Insurance Broker?  What is this third category in between Agent and Broker? Insurance Agent, Insurance Broker…  This is one of the common talking points and questions that all insurance agents and brokers get.  Please allow me to try and explain.

Insurance Agent, Insurance Broker:

According to the IRMI definition, an agent is: ” A person or organization who/that is authorized to act on behalf of another.” it continues “Insurance agents are the legal representatives of insurers, rather than policyholders…”
According to the California Department of Insurance –  “In the insurance industry, an agent is appointed by an insurance company to sell insurance policies. The agent represents the insurance company, not the insured.”
The definition of a broker from IRMI is:  “An insurance intermediary who/that represents the insured rather than the insurer.” also: ” they usually remain obligated to represent the interests of insureds rather than insurers.”   According to the California Department of Insurance a broker is:  “A person licensed by the State to sell insurance coverage with multiple health plans or insurers. The broker represents you and not the insurance companies. The broker helps you shop for the best policy.”
Which is better for you and the general public?   Should you Choose an Insurance Agent or an Insurance Broker?
I encourage all readers to read the exact full definitions from the International Risk Management Institute (IRMI).   Basically an insurance agent works for the insurance company while an insurance broker does not work for an insurance company, rather they work for you- the client.  Both have obligations to assist you in extremely similar fashion per the California Department of Insurance or the State insurance department in your particular state.  Both can sell you policies, both can service your policies in somewhat similar manners.   Insurance claims are apt to be handled differently.
Long ago the distinction between insurance agents and insurance brokers was probably much more clear, but today Insurance Agents can serve as brokers in some capacity and Insurance Brokers could serve as agents in some situations.   With the rise of the Internet, insurance wholesalers, and other modern changes, the landscape is rapidly evolving.  In my eyes thingss have changed enough to list three separate categories.
Captive Insurance Agent
Independent Insurance Agent
Independent Insurance Broker

What is a Captive Insurance Agent?  

A captive insurance agent generally only sells insurance products from one company or group of companies that they are appointed with.   The names of these companies may be extremely similar.  They may have a sales quota with that company, they may own stock or ownership in that insurance company. They are likely to know that one insurance companies products like the back of their hand.  Ask them a really specific question and the good ones, will have an insane amount of knowledge of exactly what is covered and what would be covered.  They are typically paid either by commission only or some sort of base salary and commission.  Possibly they also are paid by salary alone.


What is an independent Agent?  

An Independent Agent is typically an insurance person that is appointed with a variety of insurance companies.  Maybe just two or maybe five.  They hold legal authority with those companies.  An Independent Insurance agent would be able to know those companies policies pretty well and would be able to compare the various insurance companies offerings and coverage forms.   Independent agents would be free to write you with these different insurance carriers.  Since they are appointed with these companies, they also may have certain responsibilities with them and to a lesser extent may have sales quotas with those companies.  They are typically paid by commission only.

What is an Insurance Broker?  

An insurance broker is a insurance representative that works for the client, not the insurance company or insurance companies.  They may be able to have the ability to charge you broker fees (always in writing, up front, according to the rules of the DOI.)   Since they do not have company appointments they do not have the same duties as either a Captive insurance Agent or an Independent Agent, such as sales production quotas.  Insurance Brokers are more like free ‘excuse the pun’ agents, writing you with company A today and someone else with company B tomorrow.  Insurance Brokers work for you the client and you the client alone.  They are usually paid either by commission only or a commission and broker fees.  Broker fees should be disclosed to you before you buy the policy and policy before you even begin the process.
Insurance Agent, Insurance Broker

Which is the right Tool for you? Insurance Broker Vs Insurance Agent

Which is best for you?
I will not tarnish this piece by providing you with my personal bias, but both agents and brokers have their place in our society.  Your extremely typical situation might work real well with an captive agent, while a more complex insurance customer may do better with a broker.   Obviously the more money you are spending the more it pays to shop around.  If you are spending relatively little money, it may not be worth your time to check with both an agent and a broker, however, if you have multiple policies with a complex risk categories and are spending lots of money – moving from one category to another COULD save you money and get you more coverage.
Marindependent Insurance Services LLC – 0K10734
Please consider reading our disclosure. Speak with a licensed agent when considering insurance from a captive agent, independent agent, or broker.