Insurance Agent vs Insurance Broker
Who can better meet your insurance needs? People are often unaware of the differences between an insurance broker and agent and tend to use both the terms “broker” and “agent” interchangeably.
PolicyPals team
Published December 21, 2020.
Both insurance agents and insurance brokers help you get the insurance coverage you need and act as intermediaries between you, the insurance buyer, and insurers. They both must have the appropriate licenses to sell the insurance products they are offering.
Yet, there are many fundamental differences between insurance agents and brokers. The first key aspect in which insurance agents and insurance brokers differ is in their representation.
Insurance agents represent the insurance companies and their interests.
- An independent insurance agent represents many companies and can offer a number of quotes from different insurers.
An insurance broker represents the policy buyer, you.
- A wholesale broker works with insurance companies and retail brokers to help secure coverage in certain markets that involve a higher-than-normal level of risk for insurers.
Key differences between insurance agents and insurance brokers
The differences between a broker and an agent often determine the kind of services and insurance products you can expect from each of them.
| Insurance Broker | Insurance Agent | |
|---|---|---|
|
Representation |
Represents you, the consumer and has a duty to act in your best interest |
Represents insurance companies and their interests |
|
Number of Insurers |
Can source multiple insurers for quotes, there is no limit |
Generally, works for 1 to 3 insurers, which they are allowed to represent |
|
Options and quotes available |
Searches for insurance product that fulfils your needs
Looks for opportunities to combine different types of insurances to obtain discounts or reduce premiums
|
Offers options to choose from available policies and contracts from the insurer. These are decided through contractual agreements that the insurance agents have with the insurers to meet certain guidelines. |
|
Licensing |
Must be licensed to distribute the insurance products offered |
Must be licensed to distribute the insurance products offered |
|
Compensation scheme* |
Fixed brokerage without additional perks for any specific products.
May also have supplemental or contingent commissions
|
Base commission, and supplemental or contingent commissions (incentives for hitting target volumes/profitability and for selling specific products) |
|
Expertise |
Work with many different insurers, across many products, more effort is required to keep abreast of them all. |
Expertise only on the insurer(s) that they represent and the policies they sell. Highly knowledgeable in their insurer’s products. |
|
Pros |
Can comparison-shop and select the best prices for the coverage you need. Know how to best bundle or customize your policies. |
Exceptionally thorough product knowledge. Can offer a complete line of insurance products, when available from the insurers they represent. |
*Your insurance agent or insurance broker should provide a compensation disclosure statement that explains the types of commissions received from the insurers. This document outlines whether the agent or broker receives base commissions only, or if he also receives contingent commissions.
To decide between working with an insurance broker vs. an insurance agent really depends on your needs. Since an agent is licensed to sell policies from one or very few insurance companies, this limits your options to compare different insurance products. If you have done your research and have selected a few insurance products from a specific insurer, it might be more efficient to work with an insurance agent.
However, if you are still shopping around, or want options to consider, an insurance broker will be well positioned to help you. Also if you have specific or unique insurance needs, an insurance broker who has access to wide range of insurance products, will be in a better position to serve you.