What Is An Insurance Broker?
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TLTR:This article clarifies “what is an insurance broker?” and explains the intricacies of the insurance broker career, how to become one, and how to excel as one.

Insurance buyers and laymen often use the words “insurance agent” and “insurance broker” interchangeably. They often do not understand the difference between the two until working with both and experiencing it for themselves. Once they do, however, most would agree the difference is night and day.

Even amongst insurance professionals, a lot of misconceptions and misuses of the term exist. But have no fear, we’re here to break it down for you. Read on to find out exactly what is an insurance broker.

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What is an insurance agent?

To understand what an insurance broker is, first, you’ll need to understand what an insurance agent is.

According to Insureon, an insurance agent is a professional who sells an insurance company’s products to consumers for a commission. While agents do help consumers find insurance plans that fit into their needs and budget, ultimately agents represent their insurance companies.

There are two types of insurance agents:

  • Captive agents. These agents work for only one company. Their main priority is maintaining the sales goals of that particular company.
  • Independent agents. These agents work for various companies. Because they prioritize maintaining each company’s sales goals equally, they can be more flexible with their client and focus more on their needs.

What are the key differences between an agent and a broker?

The main differences between insurance agents and brokers are as follows:

  • Representation. Agents represent insurance companies, while brokers represent clients.
  • Bind coverage. Agents can complete sales, brokers cannot.
  • Appointment. Agents are appointed to represent the insurance companies ahead of the sale. Appointments are contracts that set rules for how much an agent can sell and what commission they can make.
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What is an insurance broker?

An insurance broker, on the other hand, is a professional who represents consumers in their search for the best policy for their needs. Brokers focus primarily on their clients and do research based on their client needs.

While captive and independent agents represent one or more insurance companies, a broker represents their client. However, because of this, they can’t bind coverage on behalf of an insurer. They would need to ultimately make a deal with an insurer or insurance agent to complete the transaction.

What does an insurance broker do?

If they cannot close an insurance deal without an agent, you might wonder what exactly is the purpose of an insurance broker. It might seem slightly redundant to pay broker fees along with agent fees.

The main purpose of a broker is to research and ensure the lowest possible cost for the best coverage. Essentially, an insurance broker is a non-biased third party that exists to reduce the amount you pay for insurance. They also help their clients find the most ideal coverage for special circumstances.

For this reason, brokers are often used when clients need to buy heftier and more expensive insurance plans. Getting a broker for your $10 per month pet insurance might prove to be a waste. Getting a broker for your company’s E&O insurance, however, can save you thousands of dollars.

    When do I need an insurance broker?

    The way you buy insurance is a personal choice. Some people prefer to skip using a broker and agent all together, and buy their insurance directly from a company. This can be done online or over the phone, without having to deal with any agents, just the insurer. However, this works best for clients who already have good knowledge of their insurance needs and options, or those opting for cheaper and less complicated plans.

    Brokers are needed when people have more complicated insurance needs, like a business owner or a non-profit director who needs more than on policy. You might benefit from an insurance broker if you:

    • Have investment properties.
    • Have a car collection, or a collection of any kind of vehicle.
    • Want to understand the details of a policy such as exclusions and limits.
    • Have a business that hires employees.
    • Have little time to research on your own.
    What-are-the-key-differences-between-an-agent-and-a-broker

    What is an insurance broker’s salary?

    According to a salary estimate made by Glassdoor, based on 413 salaries submitted anonymously to Glassdoor, insurance brokers make an average of $66,714 per year. This would vary greatly based on factors like:

    • Location
    • Client profiles
    • Amount of sales made
    • Broker reputation

    On the other hand, the median annual wage for insurance agents, according to the US Bureau of Labor, is $52,180. The lowest 10 percent earned less than $29,000, and the highest 10 percent earned more than $127,840. This number is also affected by similar factors.

    Ultimately, a broker does make slightly more on average than an agent.

    How do brokers get paid?

    All brokers make money from either commissions or fees. They may charge both of these things, only a commission, or only a fee. In most states, the law requires brokers to disclose all of their commission rates and other fees upfront. Premiums might ring in additional fees.

    Commissions

    Insurers pay a commission to the broker when they bring a client to their company. Oftentimes brokers will receive a larger commission on the first policy compared to for renewals. This ensures clients that brokers can always find them a better deal, as they have no reason to stay loyal to one company.

    The number of commission brokers receive also depends a lot on the type of policy. For instance, according to Nerd Wallet, insurance brokers can earn up to a 100% commission the first year.

    If you end up unhappy with your insurance plan and canceling it, the broker will lose either partially or all of their commission. So, brokers work hard to make sure there is a high level of trust and transparency with their clients. If a client isn’t completely on board and satisfied, the broker can’t make a commission.

    The commission does not affect the total cost for the client. That means, even if a client were to shop for insurance on their own, they. would still pay the same price. The insurer is the party that pays the broker their commission.

    Broker fees

    Some brokers, particularly experienced and reputable brokers, may charge an additional broker fee. Some states won’t allow broker fees for certain policies. In California, according to the California Department of Insurance, it’s illegal to charge broker fees. In Florida, broker fees are capped at a reasonable $35 dollars.

    Broker fees come out of the client’s pocket and are non-refundable. Even if you are unhappy with a plan and end up cancelling, you cannot get your brokers fee back. However, if your broker was being dishonest and self-serving in anyway, you can file a claim against them for the total amount you spent, including the broker fee.

    Oftentimes, people avoid brokers because of their fees. However, with a skilled broker and a large insurance need, any client would save enough money to be well worth a small fee.

    What-is-an-insurance-broker’s-salary

    How to Become an Insurance Broker

    Step 1: Earn a BA in risk management, business, finance, economics or another related field.

    Although it isn’t a requirement, if you know early on in life that this is a career you want to pursue, a bachelor’s degree can be very helpful. Potential clients and also brokerage companies will take preference to a broker with a degree. It might seem like just a piece of paper or a status symbol, but it’s uses extend far beyond that.

    A bachelor’s degree in those particular subjects can give you an edge. You’ll ingrained knowledge that a lot of your competitors may not have. Even if your bachelor’s degree is in a different subject, you’ll have skills such as research, public speaking, writing and interpersonal skills on a higher level.

    If a four-year college is not realistic or accessible, even enrolling in a two-year program at a community college can really refine these skills and knowledge of finance, economics and risk management.

    Step 2: Get an internship at a brokerage firm.

    Whether you get your BA, or not, an internship is a crucial step. This exposure to the industry will help you gain work ethic and understand the structure of a brokerage firm. You will have an opportunity to observe and participate in the internal operations of the firm.

    Generally, for internships you will receive a written evaluation from your management. This evaluation can become a great recommendation letter moving forward. You will also be able to learn more about your strengths and weaknesses through this process.

    Step 3: Get your insurance broker’s license.

    Once you feel like you are ready to take that plunge into the workforce, you need to get your license. Every state has different requirements depending on the type of insurance. Figure out whether you want to do life, personal, health, property and casualty insurance or a combination. Some states are no longer allowing brokers to pursue two or more types of license. You might need to obtain a producer’s license instead.

    You’ll typically need to pass an insurance broker exam. Make sure you study well in advance. Consider taking courses to supplement your independent study schedule.

    Step 4: Find a job immediately.

    At a brokerage firm, you will most likely start out as a broker’s assistant, unless you’ve had a long-term internship experience with glowing recommendations. Regardless of where you start, you need to work your way up in order to reach a point where you’ll be trusted with high-profile clients and receive higher commissions.

    Start applying for work the day you receive your license. The process of getting from your entry level gig to a high-paid insurance broker job is a steep climb and it would serve you best to start right away.

    Step 5: Obtain an Insurance Broker Certification.

    For career advancement, you’ll need certification in an area of insurance where you’ve acquired expertise. The National Alliance for Insurance Education and Research offers a number of voluntary certifications for independent agents or brokers. These include:

    • Certified Insurance Counselor (CIC)
    • Certified Insurance Service Representative (CISR) 
    • Health Insurance Association (HIA) certificate from America’s Health Insurance Plans (AHIP)
    • Certified Risk Manager (CRM)
    •  Certified Financial Planner Board of Standards offers the Certified Financial Planner (CFP)

    Once you have completed all of these steps, you will find yourself receiving abundant opportunity as an insurance broker.

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    In conclusion,

    What is an insurance broker? Outside of being one of the best paying jobs in insurance, an insurance broker is someone who can untangle the web of complexities that comes with insurance and offer their client the best deal possible. It’s a difficult, but rewarding job that makes you someone people can truly rely on.

    For more information on the insurance industry, check out our insurance blog. Also, ask any questions you may have in the comment section to get answers from real insurance experts.

    Frequently Asked Questions (FAQs)

    What are the best brokerage insurance firms to work for?

    According to Business Insurance, the top 10 best firms to work for are:

    # Brokerage Company Employees
    1 Burnham Benefits Insurance Services 114
    2 Cavignac & Associates Insurance Brokers 59
    3 Pritchard & Jerden 92
    4 Captive Resources 224
    5 Assurance 530
    6 Lipscomb & Pitts Insurance LLC 128
    7 McConkey Insurance & Benefits 101
    8 Socius Insurance Services, Inc. 79
    9 RBN Insurance Services 35
    10 Simply Business 128

    What are the top brokerage firms in terms of net profit?

    The top-grossing brokerage firms are as follows:

    1. Marsh & McLennan Cos. Inc.
    2. Aon PLC
    3. Willis Towers Watson PLC
    4. Arthur J. Gallagher & Co.
    5. Hub International Ltd.
    6. Brown & Brown Inc.
    7. Truist Insurance Holdings Inc.
    8. Lockton Cos. LLC
    9. Acrisure LLC
    10. USI Insurance Services LLC
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