There’s a lot to understand about how insurance agents and brokers work. We compiled some of the most common questions to help you better understand the differences.
What is the role of a broker?
The role of the insurance broker is to represent the needs of the consumer seeking insurance. Brokers represent consumers to one or more insurance carriers in order to secure them the best policy. The best policy may mean the one with the best price or the right coverages to satisfy the needs of the client. Some consumers have difficult-to-place policies and need the help of a broker to find insurance.
How do insurance agents make money?
Insurance agents make money by selling policies. They receive commissions from the insurance carrier based on a percentage of the policy’s premium. For example, if an auto insurance policy’s annual premium is $900 and the agent has an 8 percent commission, they will make $72 for the transaction. They will also make a commission when the policy renews, so it is in their best interest to service clients properly and make sure the business stays with the carrier.
What is the point of having an insurance agent?
An insurance agent becomes a partner in risk assessment for the consumer. They are there to mitigate the risk with a policy and advise the consumer on how to reduce risk, often reducing premium costs in the process. For example, an auto insurance agent might talk to their client about safer driving habits. When the client reduces their number of tickets or accidents, they become eligible for lower premiums.
Many people also like having an agent who is familiar with their family and their needs. This makes it easier to service the policy, and the consumer feels like they have an advocate.
Can an insurance broker also be an agent?
Being an insurance broker or an agent requires being licensed in the state where you do business. While it is possible for one to get both licenses, it is rarely the case.
It’s common to confuse an independent agent with a broker because they have access to more than one carrier. However, the person is still only an agent representing companies that they are appointed with; don’t confuse them with a broker who represents the consumer.