What Is The Difference Between Insurance Brokers and Agents? These 5 Points Will Help You Understand
Are insurance brokers and insurance agents the same? Many people find it difficult to differentiate between them and therefore reach out to the wrong person. Insurance brokers and agents both are an integral part of the insurance industry but they have quite different roles to play. We have listed down five points that will help you clearly understand the difference between a broker and an agent, and will help you realize the importance of hiring the services of insurance brokers Adelaide.
What is an insurance agent?
A person who works for an insurance company and sells its insurance products is called an insurance agent. He is primarily working for a single company only. That is why, when it comes to comparing prices and features of other products available in the market, insurance agents cannot really give you sound advice. Brokers on the other hand can compare several insurance providers and help clients choose the best option.
What does an insurance agent do?
Since an agent works for a particular insurance company, he sells and negotiates life, health, property and other types of insurances as per the client’s requirements. Marketing is an integral part of an insurance agent’s job. He builds strategies to promote different insurance policies introduced by the company and tries to attract more customers. An agent tries to develop a strong network of prospective clients and boost the company’s business by developing good relationships with the clients. The strength of an insurance agent lies in being a reliable first point of contact whenever it comes to filing a claim or increasing coverage due to major events in life like having a child or purchasing a new home. After evaluating the client’s needs, financial status, he proposes plans that meet the client’s requirements.
What is an insurance broker?
The chief difference between an agent and a broker is that the broker works for more than one insurance company and makes money from the commissions he gets by selling insurance to individuals or businesses. They generally get 2 to 8% commissions and sell all types of insurance including homeowner insurance, accident insurance, life insurance, health insurance and annuities.
What does an insurance broker do?
Brokers need to obtain a license from the authority. For this, they have to take relevant courses and pass an examination. Not only this, to keep themselves up-to-date and maintain their license, brokers have to continue their education courses. They are experts of this field and are well-informed about different types of insurances and coverage of claims. Their valuable advice can help clients take informed decisions. Before taking up insurance, it is important for the clients to understand liabilities and risks attached to it. A broker makes this easier for the clients and helps them manage risks throughout the duration of the policy. If you want to choose the right policy from a wide variety of options, you need to go to an insurance broker, not an agent.
The key difference between a broker and an agent:
An intermediary who acts on behalf of a brokerage firm or insurance company (service principal) is known as an agent in common language. He has the authority to make agreements between his customers and service principals. Agents and brokers are legally authorized to market services and perform other tasks on behalf of producers. However similar their roles may look, there is a key difference between the services they provide.
– There are two types of agents: Selling agents and purchasing agents. Selling agents are abided by the contractual authority. Purchasing agents, on the other hand, have long-term relationships with buyers. They are experts at evaluating the market and offering the best services and prices to the clients.
– Brokers do not work for a particular company. They bring buyers and sellers together and assist them in the process of negotiation. Brokers are paid by the party who hired them. Unlike agents, they are not long-term representatives of either buyers or sellers. Neither do they involve themselves in the process of financing and evaluating risks.
– Insurance brokers and agents both sell insurance but one must remember that agents are employees of an insurance company. That is why their opinions might be restricted to the company they work for. On the other hand, brokers are not committed to a particular company. They work for commissions. That is why, when it comes to comparing prices, brokers may render valuable advice to the clients.
– Unlike insurance agents, brokers have extensive experience of working with different types of clients with diverse needs. So, they help clients choose an insurance company that takes care of all their needs and fit their budget too.
Insurance brokers have a competitive edge over agents since they are not bound by any contract. After evaluating each and every point, you should decide whether you want to hire the services of an agent or a broker.