Insurance broker


Insurance broker, agent, what they are, how to get the best of policy

Insurance broker, agent, what they are, how to get the best of policy,

Insurance broker essentially is a professional who has a responsibility to act as a middle man or intermediary between a supposed insured/a customer who is looking to buy an insurance policy and the insurance company.

Where the broker helps the customer to find a policy that suits his/her needs. On a larger perspective the insurance broker represents the customer and works towards affording the later the best policy ever.

The broker however gets a compensation for services rendered in form of commission for selling insurance to businesses or individuals.

Points to note

  • The insurance broker works strictly for the customer and not the insurance company
  • If you are looking to buy an insurance, it involves complex tasks that you may not understand its dynamics. An insurance broker does all the requisite research for you to choose/buy a policy that’s suitable and meets your maximum requirements.
  • To qualify as an insurance broker you must have a license to practice

The concept of Insurance broker vs Insurance agent

Insurance brokers and Insurance agents are all licensed and practicing professionals who oversee the effective execution of insurance business with a coverage from both the company and the customer’s ends.

While the broker has a responsibility underlying to the customer, the agent works to represent the insurance company’s interest.

What is an insurance agent?

An insurance agent is a professional who sells an insurance company’s products to consumers/insured for a compensation known as a commission too, just like the brokers in the other end.

While the agent may sometimes appear to help a consumer select the best policy, his loyalty is solely with the insurance company and not the customer as the case may appear.

In this capacity the insurance broker must work in accordance with the state provisions and governing industry status.

An insurance agent may either act as

  • A captive agent (who represents only one insurance company) or
  • Independent insurance agent (who represents more than one insurance company).

Either ways, he/she works on commission basis from the premium payable by the customer, however, has the capacity to execute insurance transaction from start to finish.

About the insurance broker

The insurance is a professional who represents the customers or businesses who are looking to buy an insurance policy.

The broker ensures he evaluates and accesses terms and conditions closely, then recommends a policy that best suits the client’s needs at the best affordable price.

Difference between insurance agents and brokers

Insurance brokersInsurance agents
Brokers represent the customers solelyWhile agents represent the insurance company
Brokers cannot complete insurance sales, they only offer professional advisory services to the customersWhile the agents can initiate a transaction from start to finish, they work with the maximum interest of the insurance company in mind

How insurance brokers make money

The broker shouldn’t be perceived as running a community service or charity organization.  It’s a profession that aimed to be compensated for services rendered.

The broker makes money primarily through commissions and fees earned on sold policies. Where commissions emanate as a percentage of policy total annual premium.

The premium here is an amount the policy-holder is expected to contribute for the policy purchased on monthly arrangement, from where the customer will be indemnified in a case of loss arising from the existing contract with the insurance company.

The insurance company in the other hand invests the premium though setting apart a fraction of liquidity, the premium is being invested to generate higher returns from where some of the costs of providing the insurance coverage can be offset genuinely, from this point the insurance company can keep its prices competitive enough with the market trend.

A broker also makes money from his consultative and advisory services to the customer for a standing fee. There are instances where some insurance companies give incentives to brokers who perform well by paying bonuses or increased commissions, this is used to motivate such brokers to intensify certain approach that brings business and generates revenue.

Types of insurance brokers

There are basically two types of insurance brokers

  • Retail brokers and
  • Commercial brokers

There are professional brokers who act on behalf of companies and individuals, they are referred as Retail brokers. Under this category they offer health, travel, home, and auto insurance policies.

In the other end, Commercial insurance brokers specialize in offering services to industries such as gas, oil, marine, and aviation. They offer more complex policies.

Commercial insurance covers issues that may arise in the cited businesses such as equipment failure, property loss or damage.

Disadvantages of using an insurance broker

  • Lack of professionalism – A broker may sometimes lack requisite skills, they sometimes pose as specialist then scam customers in the end to make easy money. There are instances where they could work with fake license.
  • Lack of experience – A novice broker may be new to the business, may not be in terms with discounts.
  • Limitation of offers – A broker can only provide insight with respect to insurance company he works with, giving this the offers are usually limited.
  • Additional charges – Sometimes the broker may charge you for consultation aside the brokerage commission from premium.


Insurance broker helps the customer to make informed decision by evaluating and accessing the terms and conditions made available by an insurance company to ensure the customer buys the best policy. The broker has allegiance to the customer, while he earns commission from premium payable by the customer.

The broker may sometimes charge certain fees as consultation for his services too.

While the broker works for the customer, the agent works for the insurance company.

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