Insurance Agent Forum

[harryle]

Hi
Can someone show me the differences between broker and agent.
If a captive agent goes independent. So does he/she automatically become a broker and can charge broker fee for policies he/she issue?
If not what he/she has to do to become a broker?
Thank you

[Mr C]

An agent usually will represent one company to his many clients. A broker will represent one client to many companies. Don't get into broker fees because you'll be competing with virtually every other broker who doesn't have them, and many companies frown on them. There is no real need for broker fees as the money you will make will justify your efforts.

[TXINSURANCE]

The term is used largely the same by most people. Most states agents are brokers and vice versa.

I would be cautious using the word broker as consumers believe brokers have fees. i.e. Stock brokers.

I believe in most states you need a different license to collect 'fees' and in todays competitive market good luck, unless you are doing something very specialized. Most carriers won't permit adding fees either.

Maybe on the p&c side this is normal but not with most other lines.

[Dave020]

Probably varies by state, however in California there is a significant distinction.

Agent in CA is appointed with and earns commission from carriers and their products. Agents are either captive or independent.

Broker in CA is NOT appointed with any carrier, must register and post bond as a broker, and cannot recommend a specific product nor can broker earn any commission from the sale of any product--must charge a fee for service.

That being said, the term broker gets thrown around a lot and is often used inappropriately.

[NewHealthStrategies]

The longer I'm in this business... the "broker" I get.......


"I'm must be hard of hearing... she told me she said "I have acute angina"!!!

[djs]

Originally Posted by Dave020

Probably varies by state, however in California there is a significant distinction.

Agent in CA is appointed with and earns commission from carriers and their products. Agents are either captive or independent.

Broker in CA is NOT appointed with any carrier, must register and post bond as a broker, and cannot recommend a specific product nor can broker earn any commission from the sale of any product--must charge a fee for service.

That being said, the term broker gets thrown around a lot and is often used inappropriately.

Dave -

While I used to agree with this, I don't think this is true anymore. California has done away with the 'agent' license for P&C (everyone is licensed as a broker) and also has done away with the broker license for life and health (further divide this into the new license classifications, which I've yet to care a bit about).

In general, I look at it this way, though legally it's not correct:
A broker has a primary fiduciary responsibility to the client, with secondary to the company.

An agent has a primary fiduciary responsibility to the carrier, with secondary to the client.

As such, it is impossible to get an appointment to any carrier as a true broker, they only appoint agents. If you read the appointment agreement with any carrier, you'll see this.

The differences are subtle, most of the time, but who comes first is extremely important to the carriers. A while back, we had someone who wanted to write all the uninsurables in small group (guaranteed issue in California) which works as a broker, putting the client first, but breaks the system when abused, which is why carriers want agents.

I've long since given up trying to parse the subtle distinctions of a broker vs an agent. The real question is what are you trying to accomplish?

Dan