Insurance agent vs. broker: What’s the difference and how to find the right one

Insurance agents and brokers are professionals who sell insurance. They may choose to specialize in a certain area, such as property and casualty insurance (P&C), which protects businesses against lawsuits and property losses.

Both agents and brokers are licensed in the state where they operate and must comply with all governing statutes and regulations. And like any small business, insurance agents and brokers both need business insurance themselves in order to operate in many locations.

Regardless of which option you choose, agents and brokers are obligated to act in good faith in helping you find the best policy for your needs. Let’s look at the similarities and differences between the two, and how either option can help you find the best coverage in small business insurance.

An insurance agent represents one or more insurance companies and sells their policies for a commission. They can either work full-time at insurance sales for an agency, or as independent contractors.

Their job is to represent the insurance company in the transaction while also helping customers find the right coverage. The agent has an agency agreement, or contract, with the insurer that stipulates the different types of insurance the agent is able to sell and the commission rates for each policy.

There are two types of insurance agents:

• Captive agents typically represent only one specific insurance company.
• 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.

An insurance broker represents consumers in their search for coverage and can sell policies from several different insurance companies for a commission. Unlike captive and independent agents, who represent one or more insurance companies, a broker’s primary duty is to the client.

A retail broker examines a client’s needs and searches from several providers to find their client the right policy at the right price. They make their money through broker fees, which are a percentage commission on the policies being sold.

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

While both agents and brokers act as intermediaries between insurance buyers and the insurance market, and can offer insurance quotes on different policies, there are two key differences between the two:

• Agents represent insurers, while brokers represent the client.
• Agents can complete insurance sales (bind coverage), while brokers cannot.

While brokers search for policies from multiple different carriers, an agent must sell policies from one or more of the insurance providers that they represent. Agents explain the different insurance options and leave the decision up to the client, at which point they can then help facilitate a completed transaction and bind coverage to the client.

Brokers typically play more of an advisory role in finding coverage than agents, because brokers have a responsibility to represent the best interests of the client. Brokers examine several policies and recommend certain coverages from different companies, but then must turn to an agent or an insurance provider to have a selected policy bound to a client.

Businesses that have a good idea of their coverage needs might find that an agent can best serve their needs. A business that faces unique risks and challenges in finding coverage might be better served by an insurance broker.

When looking for small business insurance, many people start by getting recommendations and referrals from their friends and business associates. They also might solicit advice from any trade or professional organizations that they belong to and search the Internet for options.

It’s important to find an agent or broker who is licensed and has experience dealing with the types of insurance your business needs, has experience working with your type of business, and can sell or connect you with policies from reputable providers.

Insurance agents and brokers can provide many different types of small business insurance coverage, including:

• General liability insurance
• Professional liability insurance (also called errors and omissions insurance, or E&O)
• Workers' compensation insurance
• Cyber insurance
• Commercial auto insurance
• Commercial property insurance
• Business owner's policy (BOP)

Insureon is both a business insurance agency and a brokerage, with insurance professionals licensed in every state. Our agents help small business owners with coverage options from top carriers in the insurance industry so that they can find the right policies for their needs.

Our insurance brokers help clients find coverage outside of standard insurance products, such as excess and surplus lines, from a variety of insurance underwriters. We can help put together an insurance program that fits risk management needs of your business and are available for questions after we help you find coverage.

A pioneer in insurance technology, Insureon operates the largest online marketplace for small business insurance in the United States. Our technology platform enables business owners to easily compare quotes and purchase the insurance policies they need. Start an application today to protect your business.