Brokers Versus Agents

For the most part, all insurance brokers and agents complete the same tasks. Insurance brokers can sometimes be known as insurance agents and vice versa. Both brokers and agents are involved with selling or negotiatiating insurance. These representatives typically sell auto, life, or health insurance.

Insurance brokers and agents are the middlemen between the insurer and the insured by handling the retail portion of insurance. Largely responsible for how insurance policies are presented to the client, insurance brokers and agents help customers to assess their risks, provide consultation, update customers when insurance regulations and updates occur, assist in customers’ claims, and help to resolve benefit issues.

One of the most important jobs of insurance brokers is to help the insured develop strategies that pertain to risk management in accordance with their profiles. Brokers and agents ask the insured, also called the assured, important questions to ascertain the types of risks that the customer may regularly face and to provide explanations of the types of policies that would fit their risks so they can choose the best possible insurance for their needs. This gives the insured more information and insight on the different types of insurance, and whether they should purchase a regular policy or additional policies, depending on their risks.

All insurance agents must operate by the regulations imposed on them by the state in which they operate. In most states, including New York, any agent who engages in the practices of selling, soliciting, or negotiating insurance must first acquire a certain license that is distributed only to authorized insurance brokers.

Although most insurance companies prefer college graduates, there are no formal education requirements for becoming insurance brokers. A person, however, must usually take certain classes, which usually run between 25 and 50 hours, and pass a New York state-administered licensing exam before they are granted a license.

Those who are seeking to be licensed must also turn in a completed application to New York’s insurance regulator, whose job is to ascertain the applicant’s completion of all of the requirements and to conduct appropriate background checks.

Background checks are run in order to confirm that the applicant does not have a sordid past that would taint their trustworthiness or competence — two important qualities that insurance brokers should have.

Previous experience in the insurance industry is typically not required, as many insurance companies train their entry-level salespeople. A licensed insurance broker must usually continue their education with extra courses, and many states strike up agreements with each other so that the process of becoming a licensed broker in other states is easier for those who already are brokers.

Most states also have matching licensing laws, thanks to the Gramm-Leach-Bliley Act. As of today, the National Association of Insurance Commissioners recognize 47 different states with uniform licensing laws.

New York reserves the right to deny any insurance broker the privilege of renewing their license. The state may also revoke or suspend a broker’s license or fine the broker if New York has reason to believe that the broker has proven himself or herself untrustworthy. This can occur when someone files a complaint against the broker. In New York, complaints may be filed in the Department of State.

If the insurance broker has participated in any negligent actions, it will negatively impact clients, who will find that their coverage is no longer worth anything. That is why it is of utmost importance to retain a trusthworthy broker.

How Insurance Brokers and Agencies Can Differ

Although the terms insurance broker and insurance agent are often used interchangably, there can be some differences between insurance brokers and insurance agents, depending on the relationship type to the client. Insurance agents are sometimes known as those who represent the insurance company through the legal custom of the agent-principal. Agents holds allegiance first and foremost to their insurance carriers and not with the person who buys the insurance.

On the other hand, insurance brokers are responsible for properly representing the party who is insured, do not hold contracts with the insurers, and are expected to continually find ways to improve their insurers’ business transactions.

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