An insurance broker (or agent) is an entity that represents an insurance company (or companies) as a retail level. The job of an insurance broker is to attract customers and present options to prospective clients to meet their insurance needs.
Once engaged, an insurance broker works with the client to collect all their personal data (as appropriate for the insurer) to facilitate risk analysis for their policy, and they additionally complete all the paperwork (which may be complex) so that their risk can be underwritten appropriately with a policy.
In the United States, each state will have fairly specific requirements for the format of this documentation and that will include the printing, layout, and content, etc. It is the insurance broker’s legal responsibility to complete the paperwork in line with these legal obligations,.
The insurance broker is also sometimes able to assist with more complex insurance offerings, if they represent multiple insurers so that the client can use a series of smaller policies to greater benefit than a single large policy. This would apply in fleet situations for example.
What are the legal requirements for insurance brokers in the US?
Every state in the US has its own individual requirements to issue an individual broker license. The high level of regulation ensures clients peace of mind. Brokers can move states with relative ease thanks to the myriad reciprocity deals that enable easy requalification in other states, for those qualified in one state. In fact much of this can be done online now through electronic testing.
Brokers compete equally for business, as the law requires that large companies cannot offer additional incentives for winning large business – so they may not offer rebate based incentives or large discounts on the insurer’s pricing policies.
What do insurance brokers help with?
The broker helps customers with the policies they need from a specific company or companies, they often have access to more competitive rates than a client could access from approaching an insurer directly.
Is there a difference between insurance brokers and insurance agents in the US?
Yes and no. In legal terms there is no separation between the definitions, however in common practice an agent represents a single insurer or group of insurers and is considered to be working more for the insurer than the client. A broker on the other hand has no such contractual representation with an insurer and can be considered independent and acting on behalf of the clients.