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Differences Between Insurance Agent and Broker
An insurance agent is the one that helps a client to obtain a best-fit insurance policy as per their expectations and needs while helping an insurance company to gather and expand its business by acquiring clients by contracting with potential customers. In contrast, an insurance broker is a self-employed entity that works for itself rather than an insurance company. It works for its clients to obtain insurance by finding the best plan per their needs and earning a commission.
Insurance agents and brokers are generally used as a common word for selling insurance policies to customers. Although both sell insurance products and earn a commission based on the sales, there are differences in how the industry perceives the two.
Key Takeaways
- An insurance agent acts as an intermediary between the insurance company and the customer and sells various products
- such as health insurance, auto insurance, life insurance, etc.
- In contrast, the insurance broker sells and negotiates the insurance compensation on behalf of the customer
- and acts as an independent party between the insurance company and the customer.
- A broker has a higher responsibility toward the customer to provide the best financial product that suits the customerās needs.
Insurance Agent vsĀ InsuranceĀ Broker Infographics
Let us see the top differences between an insurance agent and a broker.
Key Differences
The key differences are as follows: -
- An insurance agent represents one particular company, whereas brokers represent the customer.
- Insurance agents sell a product of one insurance company only, whereas brokers sell products of different companies.
- Insurance agents try to build the company's image; however, brokers try to sell the best product that suits the client's needs irrespective of the company.
- Insurance agents receive in-house training from the company they work for, whereas brokers gain knowledge from external courses and experience after working in the field.
- The insurance company is accountable for the products sold by their agents; the broker is responsible to the client ā he should sell the product that best suits the customer's needs.
- Insurance agents have in-depth knowledge of the products sold by their company; however, they gain some knowledge about the outcomes of the competitor companies for better sales and comparison. Brokers know and are supposed to learn a wide range of products since they are responsible for providing the best product available to the client.
- The commission of insurance agents is usually higher than the brokers. That is because they may receive performance bonuses based on their sales from the company they work for. Commission earned by brokers is comparatively lesser than the insurance agents.
- Insurance agents usually have stable compensation, whereas the income earned by brokers may vary month on month.
- Agents have a small customer base as they are limited to one company, while brokers usually have a higher customer base.
- Agents can provide personalized service to the customers as the customer base is small; however, brokers might not offer customized services due to the higher customer base.
Insurance Agent vs Broker Comparative Table
| Basis of Comparison | Insurance Agent | Insurance Broker |
|---|---|---|
| Representation | Insurance agents sell only one company's products and try to boost the company's image by selling more products in image building. | The broker does not have allegiance to one company. Instead, they sell products from different companies and try to sell the best available product that suits their needs. |
| Training | Insurance agents receive training from the company they represent. | The company does not train brokers but prepares themselves from various external courses and experiences. |
| Accountability | The insurance company the agent represents is accountable for the agent's actions. | They are responsible to the customer as they work on behalf of the customer to provide them with the best product. |
| Knowledge | Insurance agents have in-depth knowledge of the company's products they represent. In addition, they attain knowledge about the outcomes of the competitor companies to compare them with the products they are selling. | Brokers know various products sold by multiple companies. In addition, they are responsible for the information provided to the customers; hence they should be well versed in the product before selling or offering it to the customer. |
| Compensation | The commission earned by agents is generally higher than the brokers. Since they work for one company, they may usually have a stable income with extra bonuses/compensation based on the agent's performance. | Brokers earn commissions from the product they sell, generally less than the agent's commission. They are responsible for disclosing that their products earn them a commission to the customers. Brokers usually have variable income based on the sale of the product. |
| Services provided | Agents have a limited customer base; hence they can provide personalized service. Also, the amount of service depends on the company for which they work and sell the products. | Brokers give good service because they know numerous products available; however, they might not provide personalized customer service after the sale due to the wide customer base. |
| Business Volume | The business volume for insurance agents is usually limited due to the limited customer base and as they sell products from only one company. | Brokers have a higher business volume as they deal with various companies' multiple products. |
Final Thought
Insurance agents and brokers act as intermediaries between the insurance company and the customers. While both earn commissions from the sale of the products, major differences are highlighted in the article. Both have their targets/agendas to meet and earn a higher commission. However, it is their responsibility to provide good service and the best product that suits the customer's needs.
