Insurance brokers explained
By Allstate
Last updated: January 0001
Insurance brokers act as an intermediary between their clients and insurance companies. Understanding what an insurance broker is, what they do, and what to expect from them may help you make a more informed decision about whether or not to work with one.
What is an insurance broker?
An insurance broker is a licensed professional who assists their clients in finding insurance coverage. They work with insurance companies to identify the best policy options and coverages for their clients.
What does an insurance broker do?
Insurance brokers can be responsible for multiple tasks, depending on the scope of their role as a broker and their clients’ needs.
Retail brokers are client-facing professionals that work closely with buyers, whether they are individuals, families or businesses. They act as intermediaries between clients and insurance providers, providing guidance and expertise in identifying policy options that fit a person’s unique circumstances. Some of their key responsibilities include:
- Needs assessment: Getting to know their clients, their needs and goals.
- Policy selection: Recommending appropriate policies from various carriers and providing comparisons based on personalized criteria.
- Quote comparison: Assistance in obtaining and comparing quotes from multiple carriers.
- Application processing: Coordinating with carriers to assist with filling out and processing applications.
Other types of insurance brokers include wholesale and surplus line brokers. These professionals often have different responsibilities and can handle more complex risk profiles for businesses.
Insurance agents vs insurance brokers
Both insurance agents and brokers are sales professionals who work to connect their clients with appropriate coverage options. Insurance agents typically work with one insurance provider that employ their services. Insurance brokers, on the other hand, typically work with several insurance providers and serve as an intermediary between insurance companies and their clients, according to Insurance Business Magazine.
How are insurance brokers regulated?
Insurance brokers must obtain and maintain appropriate licenses to sell insurance. This licensing is managed on the state-level and overseen by the local department of insurance or comparable body, according to the National Association of Insurance Commissioners (NAIC).
Though insurance regulations may vary depending on where you are in the country, most states coordinate with insurance organizations, like the NAIC, to help local departments align with high-quality industry standards.
Can you get insurance without a broker?
Yes. You can get insurance directly from insurers, or by working with an agent representing an insurer. Brokers work with multiple companies and may have a broader scope in offerings, and using a broker is just one option.
Insurance broker FAQs
No. Your broker cannot be the direct handler of your claim. However, depending on their clients’ needs, insurance brokers may offer assistance in managing insurance claims. That said, it is important to understand that your broker’s role is as an advocate for you.
Working with an insurance broker can be helpful in navigating the search for the best insurance policy for your situation, but it can come with drawbacks.
Brokers often charge fees which can add to the cost of insurance. This fee, on average, is around $15 according to KFF. These rates differ massively by state, and some states may have a cap on how high these fees can be.
Another potential disadvantage is that insurance brokers are typically limited to a pool of insurers that they have agreements with. This means they will not be able to show you options that could be more advantageous to you if they do not have a relationship with the insurance provider.
Working with an insurance broker can give you access to a depth of knowledge that only an expert can provide. This can allow them to identify the most cost-effective policies or discounts that may not be available directly to consumers.
Ultimately, no one can answer this question for you. It is largely dependent on your situation, familiarity, and comfort level with obtaining insurance. Here are some key considerations in your decision-making process.
- Expertise in navigating products or coverages: Brokers have extensive working knowledge of policies, carriers, and market conditions. This means they can do the heavy lifting when it comes to navigating insurance offerings if you are not comfortable doing so.
An insurance broker’s duty is to assist their client in identifying the best policy for their needs and advocating for them during the underwriting process. Having access to one can make buying insurance much smoother than if you were working alone. - Limited insurers: Insurance brokers may have limited options they can show you in terms of insurance companies. This can simplify things, and it can mean you may miss out on other policies if they are not offered by one of the companies your broker works with.
- Cost-benefit: Working with a broker may mean you incur additional costs in obtaining insurance. It’s important the benefits they provide you outweigh the cost.