Insurance Company Vs. Insurance Broker

The difference between an insurance company vs. an insurance broker is that one sells policies directly, and the other helps you compare insurance companies. There is also a difference between an agent and a broker, with one working for insurance companies and others working for you, the client. There are several types of insurance brokers, and the work for multiple insurance carriers. There are both advantages and disadvantages of insurance brokers, including broker fees of up to $35.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs...

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Reviewed byLeslie Kasperowicz
Former Farmers Insurance CSRhttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/4autoins-live/6ea5d860-leslie-kasperowicz.jpg

UPDATED: Aug 26, 2020

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What You Should Know

  • Insurance brokers focus on your specific needs.
  • Insurance companies will offer a broad selection of auto insurance options.
  • You could pay a broker fee if you go to an insurance broker.

Did you know auto insurance agents and auto insurance brokers aren’t the same? What is the difference between an insurance company and an insurance broker? If understanding auto insurance seems complicated, don’t worry. We’ll look at insurance company vs. insurance broker differences in this article.

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What is the difference between an auto insurance company and an auto insurance broker?

The difference between an insurance company and an insurance broker is that companies have agents and employees that help customers get coverage. The auto insurance broker represents the insurance buyer and gets an insurance policy using the customer’s information.

Captive agents represent one company, while independent agents represent multiple insurance companies.

An insurance agent can represent one or more auto insurance companies. An auto insurance agent, or any other type of insurance agent, is an extension of the company they represent.

The Differences Between Agent and Broker in Marketing

Brokers in marketing represent a buyer or a seller, and they’re paid by the person or company who hires them. Brokers can represent several manufacturers of non-competing products, like insurance, on a commission basis. Brokers don’t carry an inventory of products or take on risk.

Watch this video to learn more details about the differences between an agent and a broker.

Agents in marketing don’t take legal ownership or physical possession of products they sell. Agents work for insurance companies. They connect the buyer directly to the seller and receive commissions from each customer they get.

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What is an auto insurance broker?

As we mentioned before, car insurance brokers represent you, the customer. They help you search for an auto insurance policy that meets your needs.

According to Investopedia, the insurance broker definition is “an insurance expert representing consumers in their search for insurance policies.”

Auto insurance brokers don’t represent companies, so they can’t bind coverage on behalf of a company. Brokers must give the account information to the company or an auto insurance agent representing the company to complete the policy transaction.

Auto Insurance Carrier vs. Auto Insurance Broker

Auto insurance carrier is a synonym for car insurance company or auto insurance provider. These terms are used interchangeably. Auto insurance companies will have everything you need to ensure that you’re covered behind the wheel.

If you decide to go with a broker, your auto insurance coverage will be focused on your needs. However, your auto insurance needs would be determined by the expertise of an auto insurance specialist.

Review the next few subsections for more details about the role auto insurance brokers have and the disadvantages of working with a broker.

Types of Insurance Brokers

There are two types of insurance brokers: retail and commercial. Auto insurance brokers are retail brokers. Commercial brokers specialize in different industries, like gas, airplanes, and marine. Commercial brokers handle more layered policies specific to the industry where a consumer needs coverage.

How much do insurance brokers make?

All salaries vary by state. We did some research and found the average annual salary of insurance brokers by state. Review the salaries below by entering the name of your state in the upper right corner of the data table. Not looking for a particular state? Scroll through the list to compare hourly wages and annual salaries in each state.

Average Insurance Broker Salaries by State
StatesInsurance Broker Hourly WageInsurance Broker Annual Salary
New York$44.82$93,222
Massachusetts$44.39$92,341
Washington$44.08$91,696
New Hampshire$43.21$89,869
Hawaii$42.64$88,687
Maryland$41.14$85,577
Connecticut$41.13$85,550
Rhode Island$40.80$84,855
Alaska$40.74$84,745
Vermont$40.57$84,393
Nebraska$40.52$84,287
Nevada$40.42$84,080
North Dakota$40.27$83,762
Wyoming$40.24$83,689
California$40.17$83,554
Virginia$39.99$83,182
Kentucky$39.19$81,508
South Dakota$39.09$81,316
New Jersey$39.01$81,140
West Virginia$38.96$81,041
Pennsylvania$38.77$80,649
South Carolina$38.57$80,232
Minnesota$38.54$80,158
Oregon$38.44$79,964
Delaware$38.44$79,954
Tennessee$38.41$79,897
Colorado$38.39$79,846
Montana$38.36$79,788
Ohio$38.14$79,321
Wisconsin$38.04$79,132
Arizona$37.96$78,967
Kansas$37.80$78,627
Utah$37.78$78,592
Indiana$37.72$78,461
Oklahoma$37.66$78,337
Idaho$37.56$78,115
Maine$37.53$78,056
Louisiana$37.37$77,739
Iowa$36.99$76,939
Georgia$36.62$76,179
Texas$36.20$75,304
New Mexico$36.13$75,141
Michigan$36.03$74,951
Arkansas$36.01$74,896
Illinois$35.81$74,488
Alabama$35.77$74,397
Mississippi$35.41$73,644
Missouri$35.32$73,471
Florida$34.52$71,800
North Carolina$32.87$68,369
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The research is a general overview of insurance broker salary and doesn’t identify between retail or commercial. You may guess that commercial brokers earn more, considering the industry-specific policies.

Insurance Broker vs. Agent vs. Producer Salary

So, who earns more money, the insurance broker, agent, or producer? And what are insurance producers?

Insurance producers are licensed sellers of insurance that can sell and negotiate all types of insurance products, such as life, health, auto, and property.

While insurance producers are licensed sellers, insurance brokers and agents work to connect consumers to companies that sell the insurance. For example, a health insurance broker or agent may hand over information about you to the company that’s selling insurance, but a health insurance producer directly sells you the insurance coverage.

Which one of these professionals earns the most? Here’s a quick summary that shows the average hourly wage and annual salary of all three professions.

Insurance Broker vs. Insurance Agent vs. Insurance Producer Hourly Wage and Annual Salaries
Insurance Professional TitleAverage Hourly RatesAverage Annual Salaries
Insurance Broker$38.69$80,478.16
Insurance Agent$23.33$48,533.70
Insurance Producer$17.98$37,394.48
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The broker earns the most out of the three insurance professions. However, the individual salary is based on how many services you can provide your customers. Commissions are based on the number of policies, but some agencies offer an hourly wage in addition to commissions.

Disadvantages of Auto Insurance Brokers

Auto insurance brokers are intermediaries between customers and insurance companies. Brokers compare car insurance quotes for you. It’ll be up to the broker to ensure that you get the coverage you need, and you’ll pay for their expertise through a broker fee. Also, auto insurance is more expensive if you go through a broker or an agent to get car insurance.

Retail auto insurance brokers may not always work in the consumer’s best interest. However, a commercial car insurance broker can connect a business to the right insurance company. If the fee is too expensive, try another broker or shop around for an affordable commercial insurance policy yourself.

Insurance Broker Fee vs. Commission

To understand the difference between an insurance broker fee and commission, we’ll need to explain both. A broker fee is a fee you pay in addition to the auto insurance policy rate (a deposit to get your auto insurance started).  A commission is charged by the broker agency (retail) and wholesale insurance brokers, which the consumer (you) will pay to the broker.

Insurance brokers have to tell you about fees and commissions, and the costs must be reasonable. Broker fees are under strict state law. Some states, like Florida, have a relaxed approach and allow companies to administer broker fees as they see fit. According to Florida State Law, broker fees must be reasonable, but the state law doesn’t indicate a dollar amount.

Independent Auto Insurance Agent Commission Rates

According to The Street, captive insurance agents get a small percentage of an auto insurance policy, which is about five to 10 percent. Independent agents receive about 15 percent. That means if your policy is $1,030 for the year, a captive agent could make between $52 and $103. The independent agent could earn roughly $155.

Speaking of rates, don’t forget to use our FREE comparison tool to compare auto insurance companies in your area!

Frequently Asked Questions: What is the difference between an insurance company and an insurance broker?

Let’s recap what you’ve learned through a few frequently asked questions that appear on search engines across the internet. These questions will supplement what you’ve learned about insurance companies, agents, and brokers.

If you want, you can skip the questions about the difference between an insurance company and broker and compare auto insurance quotes right now. Just enter your ZIP code in the FREE comparison tool below.

#1 – How do I choose an insurance broker?

Start looking for insurance brokers in your area. Some carry broker fees, which you should ask about upon contacting them. Compare broker fees to see what works for you.

#2 – What is the difference between an independent agent and a broker?

The difference between a car insurance agent and a car insurance broker is that independent agents work with several companies and work for those companies, but brokers work with several companies on behalf of their clients. That means the broker works in your interests, not an insurance company’s interests.

#3 – Does it cost more to go through an insurance agent?

It’s cheaper because you won’t have a broker fee.

#4 – What is the difference between a broker and a producer?

Producers directly sell insurance products to consumers, while brokers represent customers and give account information to companies.

#5 – Who makes more money, insurance agents or brokers?

Brokers make more money than agents.

#6 – Should you use an auto insurance broker?

Is it a good idea to use an insurance broker? If you don’t want to shop for auto insurance or feel intimidated by the insurance process, you can ask a broker to help you find an insurance policy that’s in your budget. Getting a commercial broker makes more sense because specialty insurance is targeted toward specific industries.

#7 – How do auto insurance agents make money? How do insurance brokers make money?

Brokers make money when they connect customers to insurance policies. Insurance agents earn money through commissions when they enroll customers into their company’s insurance policy. Agents are paid five to 10 percent of each written premium that they underwrite.

#8 – What is an insurance brokerage agency?

An insurance brokerage agency (also known as an insurance agency or independent agency) is an organization that binds, solicits, and writes insurance policies through many different insurance companies.

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