Difference Between An Independent Agent and Broker?

[Guest]

Someone asked me what I did for a living the other day and I told them I was an Insurance Agent. Then they asked what company I work for and I told them I'm independent, I have contracts with many companies. He responded, "Oh, so you're a broker." I told him I wasn't a broker, just an independent agent, he asked me what the difference was, and I couldn't answer.

So what is the difference? I sell life, health, LTC, med supps, and final expense. I have more than one company in each line of business and I am not captive. Isn't that what a broker is?

 

[Fisher]

Yup, the way I look at it.

 

[Guest]

Yup, the way I look at it.

Well what distinguishes the two? Am I in any kind of violation of the insurance code if I call myself a broker?

 

[Fisher]

Well what distinguishes the two? Am I in any kind of violation of the insurance code if I call myself a broker?

Beats the hell out of me... what code?

 

[Guest]

Beats the hell out of me... what code?

The insurance code, insurance law, regulations, etc..

What those people at the state insurance department tell us we can and can't do.

 

[Fisher]

The insurance code, insurance law, regulations, etc..

What those people at the state insurance department tell us we can and can't do.

Call those people and ask, eh?

My card says 'Broker'... hope I didn't overlook a code.

 

[Dave020]

Probably state-specific.

In CA, an agent or producer sells a company's (or multiple companies) product and earns a commission from that sale. Agents or Producers may be captive or independent.

An insurance Broker, at least in CA, is not appointed with any carrier, must post his/her own bond and cannot earn a commission from the sale of any insurance product.

 

[Guest]

Probably state-specific.

In CA, an agent or producer sells a company's (or multiple companies) product and earns a commission from that sale. Agents or Producers may be captive or independent.

An insurance Broker, at least in CA, is not appointed with any carrier, must post his/her own bond and cannot earn a commission from the sale of any insurance product.

I'm going to try not to sound too idiotic here...

If they aren't earning a commission on the sale of product how are they earning money? Do they charge a fee to the client for the consultation?

I'm sure you're correct, that it is state specific.

 

[djs]

I think the right way to look at it, beyond what Dave said, which is 100% correct, is where is the fiduciary responsibility? With the carrier or the client?

If you are paid by the carrier, have a contract with the carrier, then your fiduciary responsibility is with the carrier, the contract you signed makes you an agent of the carrier. You have to do what is in the best interest of the carrier first.

If you are paid directly by the client, have a contract with the client and not with the carrier, then your fiduciary responsibility is with the client. You have to put the best interest of the client first. In this case, you are the broker.

Now, before you say that you always do whats best for the client, I will agree that usually the client and the carrier have somewhat mutual goals. The client wants the carrier to take a certain risk in exchange for money, the carrier wants money to take on a certain risk. It's not always that clean, but usually it works. That's why it depends who pays you.

When the carrier pays you, you would probably not recommend not having the coverage. When the client pays you, you may recommend using premium dollars elsewhere, since you are no longer tied to making a commission.

I've met very few true brokers in my life.

Dan

 

[Dave020]

I'm going to try not to sound too idiotic here...

If they aren't earning a commission on the sale of product how are they earning money? Do they charge a fee to the client for the consultation?

I'm sure you're correct, that it is state specific.

Sorry, yes, the broker in California charges a fee for service not paid by the carrier as a commission.

And, as Dan says, it does change the fiduciary responsibility and I don't think I have ever met a licensed insurance "broker" in California. I am sure that they exist, but have never met one.

The current vogue term in CA is "producer".