Hi everyone i'm new to the group. I've been an l&H agent for about 5 months and have done well so far. I'm cusriors though and can't seem to find out the difference between Independent vs Broker. Please explain.
In the P&C world, there is a much cleaner distinction, though technically, the difference is between broker and agent, and then independent vs captive.
Captive vs independent is simply your contract. With a captive contract, you write usually for one company (or group of companies). Independent allows you to place the business with different companies. Pros and cons both ways, which is a different thread.
Broker vs agent. Technically, an agent represents the company, a broker represents the client. This has no bearing on how many companies are represented. An agent, in the P&C world, will usually have binding authority (the ability to say, yes, you are insured). A broker does not, though frequently the computer will instantly bind upon submission. A broker can charge a brokerage fee, an agent cannot. (Many carriers do not allow brokerage fees). As I understand it, in some states, there is a different license for being a broker vs being an agent. In California, they have done away with this distinction.
I do both in the P&C side. I have binding authority with some companies, and technically act as an agent (representing the company) and I broker business in other cases, where insurance is not effective until actually submitted to the company and the computer / underwriter accepts the risk.
I don't think there is as much a distinction nowadays as there used to be.
I'm not sure about P&C, but in PA the distinction between agent and broker has been eliminated for life, health, and annuities. The license is now called a "Producer's License." At one time in PA an agent could take a test to become a broker. It was basically the same test as for agent but required a higher passing score. The only advantage was that a broker did no have to pay appointment fees for companies represented. As I said before, the distinction has been eliminated and today the terms are used interchangeably.
I'm not sure about P&C, but in PA the distinction between agent and broker has been eliminated for life, health, and annuities. The license is now called a "Producer's License." At one time in PA an agent could take a test to become a broker. It was basically the same test as for agent but required a higher passing score. The only advantage was that a broker did no have to pay appointment fees for companies represented. As I said before, the distinction has been eliminated and today the terms are used interchangeably.
One thing to think about, is that there is the technical difference, which I think is fading rapidly, and then there is the perception difference to the client. For some reason, a lot of clients think a broker will get them better deals because they can 'shop' the policy. In other cases, the clients see the broker fees added to a policy, and wonder just how much they really are saving.
Part of this is perpetuated by the concept of a mortgage broker, vs going directly to the bank. In many cases, people used to think the independent mortgage broker would get you a better deal, now they are finding out, in some cases, the independent mortgage broker just got the broker a better deal.
My dad always marketed himself as an "Insurance Broker". Supposedly, this was meant to imply that he would find the best coverage available for a particular client, from whatever company had what the client needed.
As opposed to an agent for a given company, who is there to sell you a product of his company, whether it fits your needs exactly or not. It seemed to work pretty well for him, but I don't have a broker's license, nor did my mom, so when he died we changed the name to Grady Insurance Services.
Dave
------------------------------------ 3rd Generation Independent Agent- L&H Only
Independent vs Broker
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