Posted on May 17, 2014
If you have existing commercial insurance policies or are just starting out with a new business, understanding the difference between insurance agents and brokers can help you understand their roles in the process of helping you obtain appropriate and adequate amounts of business insurance. Your relationship with your agent or broker is important since it is for the long term, and you want a professional that you can trust to assist you with your business needs.
The term agent and broker are often used interchangeably; however, the two roles are completely different. An insurance agent works for both the insurance company and insured as a sort of intermediary between the two. For the most part, agents assist clients with quotes, applications and paperwork necessary to obtain and maintain commercial insurance policies. They do not provide comprehensive evaluations of a client?s business operations or ensure that appropriate insurance coverage is in place. They primarily function to help you secure insurance when you need it. Most agents fall into one of two categories. They are either captive agents meaning that they only work for one insurance company or independent agents, who represent a variety of insurance companies. Independent agents can help clients compare policies from different insurance companies. Insurance agents are paid by commissions from the insurance company.
Not only do insurance brokers offer a broader range of insurance products for commercial clients, but their primary function is to represent the client rather than the insurance company. In essence, insurance brokers work for you. Brokers must be licensed by the state in which they work, and typically have more experience and continuing education requirements than agents. Brokers are responsible for helping clients by analyzing their business operations and making sure that the company purchases the right amount and type of coverage. Because their services are more comprehensive and advisory in nature, insurance brokers usually charge an administrative fee for service.