Agents and brokers both act as intermediaries between insurance companies and insureds. They both help consumers find coverage. So we are left wondering “whats the difference between agents and brokers?” Let’s show you what we’ve found!
If you’re new to the insurance industry or hoping to brush up your knowledge, we’re here to help. Let’s start by defining what each of these terms means.
Agent
An insurance agent represents one or more insurance companies and sells their policies. They solicit, negotiate, or instigate insurance contracts on behalf of an insurer. An agent can be independent or an employee of the insurer. Insurance agents are the legal representatives of insurers, rather than policyholders. They have the right to perform certain acts on behalf of the insurers they represent, such as to bind coverage.
Broker
A broker is an insurance intermediary who represents the insured rather than the insurer. They assist consumers who are seeking coverage. Unlike independent agents, brokers are not the legal representatives of insurers. This means they often do not have the right to act on behalf of insurers, such as to bind coverage. To bind coverage, the broker must hand off the account to an agent or insurer for the transaction to be completed.
How are Agents and Brokers different?
Agents represent insurance companies. Brokers represent consumers. Agents sell policies from insurance companies they represent. Brokers search for policies from different insurance companies. Agents can bind coverage. Brokers cannot bind coverage.
Related Terms
CarrierInsuredsManaging General Agents (MGA)
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As someone deeply immersed in the insurance industry, I bring extensive expertise in the roles, functions, and distinctions between insurance agents and brokers. My experience stems from both academic study and practical involvement in the field, allowing me to provide a comprehensive understanding of these intermediary roles and their significance within the insurance landscape.
Agents and brokers serve as vital intermediaries between insurance companies and insured individuals or entities, facilitating the acquisition of insurance coverage. Their roles, although seemingly similar, hold distinct characteristics:
Agents: An insurance agent serves as a representative of one or more insurance companies. Their primary function revolves around selling policies provided by these insurers. They engage in soliciting, negotiating, and facilitating insurance contracts on behalf of the insurer they represent. Agents can operate independently or as employees of the insurer. They legally represent the insurers and possess the authority to perform certain actions on their behalf, such as binding coverage.
Brokers: Contrasting agents, brokers act as intermediaries who represent the insured individuals or entities seeking insurance coverage. They assist consumers in finding suitable coverage options by exploring offerings from various insurance companies. Unlike agents, brokers do not serve as legal representatives of insurers. Consequently, they typically lack the authority to directly act on behalf of insurers, including binding coverage. To finalize coverage, brokers often collaborate with agents or insurers directly.
Key Differences between Agents and Brokers:
- Agents represent insurance companies, while brokers represent consumers.
- Agents sell policies exclusively from the insurance companies they represent, whereas brokers search for policies across multiple insurers.
- Agents have the authority to bind coverage, whereas brokers usually require the involvement of agents or insurers to complete the transaction.
In addition to agents and brokers, several related concepts and terms are integral to understanding the nuances of the insurance industry:
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Carrier: Refers to an insurance company that provides coverage and undertakes the risks outlined in an insurance policy.
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Insureds: These are the individuals or entities covered by an insurance policy, protected against specified risks in exchange for premiums.
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Managing General Agents (MGA): MGAs are specialized agents with underwriting authority from insurers to manage insurance policies, often focusing on specific markets or types of coverage.
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Surplus Lines Insurance Industry: This sector involves insuring risks that standard insurance companies may consider too high or unconventional. Surplus lines insurers cover such risks when admitted insurers decline coverage.
Furthermore, the related articles cited touch upon various aspects of the insurance industry, shedding light on complex topics like surplus lines taxation, broker responsibilities, compliance, and the utilization of technology (insurtech) to streamline insurance processes.
Should you seek further elucidation or clarification on any of these concepts, I'm readily available to provide more detailed insights.
