Different Types of Insurance Agents: What's the Difference?

While many people are familiar with insurance as a whole and understand that they have a designated insurance agent, few know that there are different types of insurance agents. Knowing the different types of agents could make a major difference in obtaining the coverage you need at the right price point. When buying a new insurance policy for yourself or your business, it is important to know the difference between the different types of insurance agents so you can find the right agent for your needs.

What Is an Insurance Agent?

An insurance agent is a licensed professional whose job is to help individuals and business owners purchase the right insurance at a reasonable price. Insurance agents often specialize in one specific type of insurance, including:

• Commercial general liability insurance
• Commercial property insurance
• Business income insurance
• Business owner’s policies
• Professional liability insurance
• Errors and omissions insurance
• General liability insurance
• Health insurance
• Car insurance
• Homeowners insurance
• Life insurance
• Umbrella insurance
• Renters insurance
• Travel insurance
• Pet insurance

Insurance agents are particularly helpful because they understand all their state’s statutes and regulations. Since they specialize in one particular insurance type, they are also excellent resources for homeowners, renters, and business owners.

Insurance agents make a living by selling insurance policies for a commission. Agents also have a contract with the insurance company they represent. These contracts determine which policies they can sell and how much commission they can expect to make on the sale of one of these policies. Insurance agents may also bind a consumer to their insurance policy via an underwriting system.

The different types of insurance agents include:

• Captive agents
• Independent agents
• Online agents

Direct or Captive Agents

Direct agents, or captive agents, are insurance agents that work for big-name insurance companies. These companies include Allstate, State Farm, Progressive, Liberty Mutual, and Farmers. Direct agents work by purchasing a franchise from one of these major insurance companies and exclusively selling policies from said company.

Direct or captive agents glean a variety of benefits. They are recognized in their communities for the big-name companies they represent. Oftentimes, direct agents sponsor local or national events. Then, they reap the reward of consumers reached through the sponsorship. Since a direct agent only works for one insurance agency, their processes are streamlined, and they gain significant underwriting knowledge to bind the insured. Direct agents can work full time or as independent contractors and often receive direct support from the insurance agency they represent. This also results in referrals or leads.

Independent Agents

Independent insurance agents run privately-owned businesses. These agents aren’t confined to one particular insurance agency. Instead, they may sell policies from a variety of different companies. Independent agents are often referred to as insurance brokers.

One major difference between captive and independent insurance agents is the relationship brokers have with the insurance companies they represent. Independent agents represent the client rather than the carrier, so they are better able to cater to the client’s best interests. Their larger pool of policies also enables them to help clients secure the perfect policy.

Just as there are different types of insurance agents, there are different types of insurance brokers. These different types include retail, wholesale, and surplus line brokers.

Retail Insurance Brokers

Retail brokers work closely with the insured to find the best possible insurance policy. These brokers help clients buy general insurance policies that cover common risks directly from an insurance carrier. They may also help clients buy from a wholesale broker.

Wholesale Insurance Brokers

Unlike retail brokers, wholesale brokers sell specialized and complex insurance policies. They sell to both retail brokers and insurance agents alike. They do not work with clients at all.

Surplus Line Insurance Brokers

Sometimes, an individual or business needs a policy that goes beyond the norm. They may need a policy that covers extreme or complex risks that aren’t covered by standard policies. Businesses that have a history of extensive claims or losses may be considered too risky to insure by standard insurance companies. This is where surplus line insurance brokers come in handy. These brokers can help retail or wholesale brokers determine the best policy for their clients.

Online Agents

Online insurance agents are similar to captive agents in that they work for one insurance company. The difference is that online agents sell policies online and over the phone rather than from a brick-and-mortar location. Online agents may be based virtually anywhere, so they do not have the local knowledge that an independent or direct agent would have. The benefit of online agents is their ability to sell insurance policies quickly and easily. They also tend to sell cheaper policies than other types of agents.

What Is the Difference Between Agents and Brokers?

When it comes to the difference between the different types of insurance agents, there are two factors that stand out.

• Insurance agents represent the insurance agency, while insurance brokers represent the client.
• Insurance agents can bind coverage through sales, while an insurance broker cannot.

Another difference between agents and brokers is that agents can book appointments to represent single or multiple insurance carriers. Brokers, however, do not. Instead, brokers are able to request quotes from more than one insurer to provide the best policy for their clients.

Insurance brokers hold a legal relationship with their clients, while insurance agents do not. This relationship allows brokers to take part in a more advisory role with their clients to help them choose the right policy for their needs. Agents can only explain the coverage but cannot provide advice.

Should You Use an Agent or a Broker?

Insurance agents and brokers both have their advantages. It can be difficult to tell which one to go with when it comes time to purchase a new policy. When deciding whether you should use an agent or a broker, there are a few things you can consider and a few questions you can ask. This includes whether you want someone who can provide advice or if you’re comfortable with your own knowledge. Another factor to consider is the risks involved and whether you need simple or complex coverage. 

To learn more about the different types of insurance agents in the state of California, contact our California insurance agency. The professionals at Saferoad Insurance are ready to help.