Insurance Agents and Insurance Brokers - What's the Difference?

Posted on: Thursday, October 3, 2013

Admit it, you have probably interchanged the terms insurance broker and insurance agent at least once, haven’t you? For most of us, if we hear the words agent or broker, we probably tell ourselves, “What’s the difference?” However, for consumers, as well as insurance providers, the distinction is significant.

Insurance Agents

Agents work on behalf of their respective insurance companies. They can only offer services from companies that they are affiliated with, and they are paid directly by those companies. An insurance agent’s responsibility to his or her customer is purely administrative in nature. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and other paperwork. An agent may assist a policyholder in filing claims, or offer clients different services which are available from their company.

Agents are not obligated to conduct a thorough examination of an individual’s business, or to review a client’s health insurance policy in an effort to evaluate that individual’s coverage. Rather, it is the customer’s obligation to make sure that he or she has purchased the appropriate amount of insurance. 

Insurance agents can be either:

  • Captive – A captive agent is an agent who works for only one company and is a “captive” of that company. A captive agent will sell policies only for that insurer.
  • Independent – An independent agent is one who works as an agent for a variety of different insurers. An independent can produce policies from several insurers and offer some comparisons of different insurance policies.

Insurance Broker

A broker’s job, however, is slightly different. Brokers do not work for any specific insurance company. They work for the customer, with much broader independence than an independent agent, although brokers often perform the exact same duties as an agent. They quote rates, for instance, and receive a commission from the insurance company. Brokers can also offer a variety of insurance products and services for prospective policyholders to consider, just as agents can. 

It may be said, though, that insurance brokers provide more complicated services for their clients. As a broker, they have a duty to analyze businesses, if requested, in order to secure correct and adequate coverage for clients. They can also acquire insurance which may otherwise be unavailable in that customer’s market area.  This goes beyond the purely administrative duties of an insurance agent. However, this expertise comes at a price.

Brokers are required to have a broker’s license issued by the IRDA (Insurance Regulatory and Development Authority), which typically means that the broker will have additional technical and professional expertise as compared to an insurance agent. They may, therefore, charge a broker fee. In order to do so, they have to separate that fee from the services being charged by the insurance company.

While it is possible that this fee may cost you less than working with an employee of the insurance companies, the extent of these fees depends on the extent of the business relationship between you and your broker. The more services provided by the broker, the likelier it is that the client will pay higher fees.

Got questions? At Core Benefits Group, we have the answers. Please call us at 1-877-214-2969.


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