What is an insurance agent?

An insurance agent is a professional who sells an insurance company’s products to consumers for a commission. To sell insurance, an agent helps consumers select the right insurance to buy, but represents the insurance company in the transaction. There are two types of insurance agents:

Captive agents

Captive agents typically represent only one insurer.

Independent agents

Independent insurance agents typically represent more than one insurer.
Both captive and independent agents work on commission and can execute an insurance transaction from start to finish, on a variety of insurance plans.

What is an insurance broker?

An insurance broker is a professional who represents consumers in their search for the best policy for their needs. Brokers work closely with their clients to research the client’s needs. The broker examines the terms and conditions of several options, and recommends an insurance policy that best suits the client’s needs at the best price.

Unlike captive and independent agents, who represent one or more insurance companies, a broker’s primary duty is to the client.

Since brokers don’t represent insurance companies, they can’t bind coverage on behalf of an insurer. They must hand over the account to an insurer or insurance agent to complete the transaction.

What are the key differences between an agent and a broker?

There are two main differences between insurance agents and brokers:

• Agents represent insurers, while brokers represent consumers.
• Agents can complete insurance sales (bind coverage), while brokers cannot.
• Agents also receive appointments to represent one or more insurance companies, but brokers do not. An appointment is a contract an agent and insurer sign that outlines the products the agent can sell and for what commission rates.
• Brokers, on the other hand, can solicit price quotes from multiple insurers. When consumers are ready to buy, they must obtain a binder directly from an insurance agent or the insurance company.

Summary

In a nutshell, the primary difference between an insurance broker and an insurance agent is who each represents. While a broker represents the insurance buyer, an agent represents one or more insurance companies.