Developer for Accurate Task

Similarly,like other business owners, you probably have purchased some insurance policies and claims throughout your work and time from an insurance broker or agent.

The functions that insurance agents and brokers perform are similar, but not identical, and that is something you should remember.

For instance, companies like SchemeServe creates valuable software that both insurance brokers and agents use. However, they use it differently, and we decided to present to you how they differ and how they make money from premiums and other things that will help you understand both types.

Broker Versus Agent

Have in mind that both brokers and agents function as intermediaries between the insurance buyer and insurers.

Each of them features legal duty to provide you withappropriate coverage for a reasonable price tag. At the same time, both of them have to acquire a license so that they can distribute insurance that they are selling.

Both brokers and agents must follow the rules and regulations of the state in which they operate. The main difference between an agent and a broker has to do with whom they represent along the way.

An agent represents one or more insurance companies, and he/she acts as the extension of the insurer. On the other hand, a broker represents an insurance buyer and that something you should understand.

Agents are either independent or captive, which means that they can represent one insurer strictly or multiple insurers based on their preferences and selling skills. If you wish to sell insurance products on behalf of some insurer, the agency must have conducted an appointment with an insurer.

An appointment is the first step toward agreeing as well as an outline with the idea to present specific products that the agency could sell. It is also vital that agents specify commission the insurer has to pay for each product he chooses.

The contract describes the agency binding authority, which means that they will have the power to initiate policy on the insurer’s behalf. The agent can have permission to bind some types of these coverage’s but not all of them.

On the other hand, brokers are not appointed by insurances,and they are soliciting insurance quotes from insurers and submitting the final application on behalf ofthe buyer. At the same time, brokers do not have the authority to bind coverage.

If they wish to initiate some policy, they have to obtain permission and binder from the insurer. A binder is a legal document, which is a temporary policy, and it applies for a short period between 30 and 60 days.

A binder is not relevant and valid until representative of insurer decides to sign it and only then,binder will replace it will policy.Click here if you wish to learn more on insurance brokers.

Brokers can be either wholesale or retail. Retail brokers interact directly with insurance buyers.

As soon as you visit a broker that obtained insurance coverage on your behalf, he/she is a retail broker. In some specific cases, your broker or agent cannot receive insurance coverage on your behalf, and in that, even he/she may contact a wholesale broker.

A wholesale broker specializes in specific types of coverage’s,and many of them are surplus lines broker, and they will arrange coverages for risks that are hazardous and unusual.


Even though some captive agents are getting salaries, most brokers and agents rely on commission fee as the primary income. They get commissions from premium, which was charged by insurers.

This can include contingent and base commissions. Base commission is standard and earned by using insurance policies. It is expressed in terms of percentage of premium,and it can vary from coverage to coverage.

Incentive or contingent commission rewards brokers and agents for achieving profitability, volume, insurance growth or retention goals that insurer established. These commissions tend to be controversial because brokers represent insurance buyers.

Therefore, brokers should not accept these commissions, and some brokers decide to do so without knowledge of their clients.

Another issue is that this particular commission type is an incentive that will steer insurance buyer into specific policies that will be lucrative for the insurer.

However, that creates a conflict of interest especially when it comes to insurance brokers, so you should ask them about it before you choose the appropriate one for your requirements.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *