What's the Difference Between an Insurance Agent and a Broker?

Differences and Similarities Between These Insurance Professionals

An insurance agent points at a laptop screen as she explains a policy to a couple in a bright kitchen

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When you start the process of buying insurance, you’ll likely have to decide whether to work with an insurance agent or a broker. But you might hesitate to choose one over the other because you want to get the best deal, coverage, and customer service with your policy. To help you feel confident in choosing the best fit for your needs, we’ll go over the differences between these two types of insurance professionals. 

What Is an Insurance Agent?

Insurance agents are salespeople who help consumers find and buy the insurance products they need, including auto, home, life, or other insurance policies. Agents are appointed by insurance companies to sell insurance products and perform services for both insurers and their policyholders. 

Insurance agents who work exclusively for one company are known as “captive” agents, while those who work for multiple insurers are called independent agents. In general, captive agents sell more personal lines, like home and auto insurance, than independent agents, who focus more on commercial insurance. One of the biggest differences between captive and independent agents is that the latter have legal ownership of access to policy renewals. Captive insurance agents may not, and are usually employees of an insurance company or independent contractors. 

What Is an Insurance Broker?

Insurance brokers function more as liaisons between the consumer and the insurer. They represent you in dealings with the insurance provider or underwriter, and may provide additional services depending on your needs. 

The broker’s responsibility is to find the insurance coverages you need for the best policy premiums, terms, and conditions. They may work through other brokers or agents or directly with an insurance company to find a policy that suits your needs and budget. 

Insurance brokers can ask for quotes and policies from insurers and submit applications on your behalf, but they can’t bind your coverage or provide an insurance binder on behalf of the insurance company since they aren’t an insurer.

Insurance Agents vs. Brokers

Differences Similarities
Compensation received Services provided
Number of options provided to consumers Role as intermediaries between consumers and insurers
Traditional representation Professional regulation

Differences Between Insurance Agents and Brokers

Insurance brokers may receive compensation for their services through commissions paid by the insurers or reinsurers they work with (typically 7% to 15% of the total premium) and through broker fees charged to consumers for services provided. 

Insurance agents may also receive similar sales commissions from the insurers they represent. But they are more likely to get additional compensation, called contingent commissions, by meeting specific criteria (similar to a performance bonus). Insurance brokers used to receive contingent commissions as well, but it's no longer common practice.

Contingent commissions aren’t tied to specific policies, and agents don’t know how much they’ll get—if anything—until the underwriting year closes.

Insurance brokers also have greater access to the wider insurance marketplace, since they aren’t committed to working with specific providers and products. They may be experts in certain sectors, industries, or risk types. Brokers not only assess the insurer’s product but the insurer as a whole, looking at its financial stability, customer service, claims-paying record, and more. 

Traditionally, insurance agents represent the insurer, and brokers represent the client. What an agent can offer you depends on the coverages provided by the companies they work with, whereas an insurance broker can consider many insurers to find the best policy for your needs.  

Similarities Between Insurance Agents and Brokers

However, the lines between the roles of insurance agents and brokers aren’t always so distinct, and many consumers see both agents and brokers as their representatives. Indeed, brokers sometimes have agreements with insurance companies, notes the Insurance Information Institute. 

Both types of professionals assess risk, offer policy coverage suggestions, provide a selection of choices, are involved in the claims process, and act as your representative in dealings with the insurer. Consequently, consumers typically see agents and brokers as intermediaries between their need to transfer risk (such as potential car accident expenses) and insurers accepting that risk. 

The commonalities that exist between the functions of agents and brokers may be why some states assign agents and brokers the same “producer” license, as opposed to separate “broker” and “agent” licenses. Both types of insurance professionals must be licensed in the state where they do business and meet the state rules and regulations overseeing their activities. 

Who Is an Insurance Agent Best For?

An insurance agent may be a better fit if you:

  • Already have a policy directly with an insurer and want to bundle your coverage with other types of insurance.
  • Want to compare quotes yourself and speak with an agent to answer questions or complete your policy purchase. 
  • Want to be matched with coverage available from a particular insurer or group of insurers.

Who Is an Insurance Broker Best For?

Insurance brokers are suitable if you:

  • Want to compare coverages and prices throughout the insurance marketplace.
  • Want impartial recommendations on the best insurance policy for you based on your needs and desires.
  • Are having trouble finding insurance, such as home insurance for high-risk homes.
  • Don’t mind potentially paying a broker fee for the services you receive.

Key Takeaways

  • In general, insurance agents represent the insurance company, and insurance brokers represent you.
  • You may not notice much of a difference when speaking with a broker or agent, as both provide similar services, such as evaluating coverage options or helping you file claims. 
  • Insurance agents work with one or more specific insurers to match you with the coverage you want. Insurance brokers comb through relevant insurance companies on the market, screen them, and present the ones that are the best match for your needs. 
  • Agents and brokers are licensed and regulated by state laws and receive commissions from insurance companies. Brokers may also charge you a broker’s fee.