What is the Difference Between an Insurance Broker and an Insurance Agent?
The terms insurance broker and insurance agent tend to be thrown around rather loosely. Sometimes a client will confuse their agent for a broker or vice versa. But we want to set the record straight! There are some very big differences between the two. In fact, their only real similarity is that they both administer insurance. So let’s take a look at the difference between an insurance agent and broker, shall we?
What is an Insurance Agent?
An insurance agent is tied to and works for one company only. Some examples of insurance agencies are Statefarm, Belairdirect or Allstate. With an insurance agent their loyalty is with their company where as a broker has loyalty with the client. We should mention that there certainly are good agents out there in the world, I mean take Agent 007 James Bond for instance. he is an agent and pretty darn cool, but he’s not quite the same as an insurance agent.
Benefits of an Insurance Agent
Knowledgeable about their products. One advantage an agent has over a broker is they only need to learn the ins and outs of one market. This means they should be able to advise on their product better than anyone else. However if you ask them about comparisons to other markets or products they may be limited in their knowledge outside of their own company or offerings.
Another benefits is they typically have good rates for their perfect clients or target market. If you fall into the agencies desired clientele you will likely experience some good rates when it comes to your insurance. However, be careful if you are trying to add family members or other products that fall outside of that desired market as often times their premiums are much less competitive or they do not underwrite the insurance at all.
Drawbacks of an Insurance Agent
The biggest drawback of an insurance agent is their claims. But don’t take our word for it, take the word of the Smith Family who were insured with an agent and not a broker. Because an agent is loyal to their company they are not always the easiest to deal with when it comes to claims. The financial damage awarded in a claim is tied directly to the companies earnings. Meaning if they are paying out a lot of claims, or expensive claims it is going to hurt the agencies bottom line. Obviously this can lead to the agency trying to payout less on their claims or not award the full damages as we saw from the Smith Family scenario.
Another drawback is their narrow scope or product offering. For instance, lets say you have your home and auto insurance with an insurance agency, but now you want to add your motorcycle or your boat. Often times those insurance products are not offered by the insurance agency and you will have to look elsewhere. Not very convenient to have your insurance spread out through multiple different channels.
What is an Insurance Broker?
Awesome. In fact an insurance broker is anyone like us at McDougall Insurance! An insurance broker has access to multiple insurance companies and products and can search all of those companies to find the best combination of premium, coverage and service. An insurance broker is loyal to the client where as an insurance agent is loyal to their company.
Benefits of an Insurance Broker
The biggest benefit to an insurance broker is they work for the client. This means no matter what the client needs the broker is their for them. Just had a claim and don’t know where to turn or haven’t heard back from an adjuster. Insurance broker is there. The broker sold you the policy, the broker has the relationship with you, the broker makes sure the insurance company treats you fairly. Need to add a driver to a policy. Insurance broker is there. Looking to shop rates at your renewal. Don’t worry an insurance broker is already doing that for you!
Another benefit that an insurance broker has is they can write all of your insurance needs under one roof. You have your home and auto insurance bundled together but now you need your business insured. Voila, broker can do it! Or maybe you just bought a new boat and need to find some insurance. No sweat, the broker can do it! You have a family and you want to make sure they are protected in the event something happens to you. Sounds like you need some life insurance, and yes, you guessed it, the broker has you covered! Brokers can even do specialized policies for those unique items, like your jewellery collection, your music studio or pretty much anything.
Drawbacks of an Insurance Broker
Hmm, you really made us have to think about this… The answer most clients tend to believe is it costs more because you need to make money. However, this isn’t exactly true. It is true the broker makes a commission on the policy but that commission is taken out of what the company would typically make on the policy, not placed on in addition. The reason being is the company really didn’t do anything to acquire the client, the broker did all the work to get the policy set up and form the relationship with the client. All the company is doing is providing the insurance. With an agency that money goes into acquiring and finding their clients and so when it comes to finding competitive pricing a broker should be just as competitive or maybe even more competitive than an agent.
Brokers typically have a lot of markets they can access and although this is typically viewed as a major benefit, it can be difficult to know the ins and outs of all those companies. What does that mean for you, the client? It means a broker may need a bit more time to find you the correct answer, but you can rest assured we will have an answer.
Brokers & Agents
Insurance is important for each and every one of us and whether you choose a broker or an agent is entirely up to you. The important thing is to feel confident in your coverage and provider and have the peace of mind that insurance is designed to bring. Ok scratch all of that, go with a broker, we’re better and we’ll prove it to you! Give us a chance by calling 1-800-361-0941 or filling out a quote form on our website. Talk then!