What Insurance Brokers Do
Insurance brokers assist you in finding the best coverage for your needs, but they are not required for everyone.
When shopping for insurance, it’s a good idea to seek quotes from several companies to discover the best deal. While practically anybody can compare prices online, in some circumstances, having someone walk you through your options makes sense.
What exactly is an insurance broker?
An insurance broker works as a go-between for you and an insurer. The broker represents *you* – not the insurance company.
A good broker can offer you a coverage that meets your needs and can shop around for the best prices. In many cases, brokers have great relationships with insurance underwriters, and the broker can “sell” your policy to the insurance company – then negotiate the right options for you.
When should you employ an insurance broker?
Using a broker is not required for everyone. It is up to you how you get insurance, however brokers are normally best suited for clients who have more complicated insurance needs, such as a landlord or small business owner who has many policies.
How are brokers paid?
Understanding how brokers are compensated will help you avoid brokers who are more concerned with making money than placing you with the correct policy.
Brokers can earn money in two ways: through commissions or broker fees.
They could charge both or just a commission. In most states, brokers are required to disclose commission rates and other expenses up front. Still, it’s a good idea to inquire about any other fees that may be levied in addition to the premiums. BlueIron, for example, typically is paid by the insurance companies as part of their published commission structure.
Brokers are often paid a commission by insurers.
The commission amount varies depending on the policy and provider, and it is usually determined as a percentage of the premium. For commercial insurance, the commissions may range from 5-20% of the premium.
Wholesale vs Retail Brokers
Most insurance companies have commission structures for wholesale and retail brokers. A retail broker is usually the agent who sells directly to the customer. The retail broker is your personal insurance agent who knows all your needs and finds policies from many different insurance companies.
A wholesale broker typically specializes in a specific type of insurance. Wholesale brokers have deep industry knowledge and are the resource that helps retail brokers with difficult types of insurance.
BlueIron is both a retail and wholesale broker. As a retail broker, we sell IP insurance directly to companies. In many cases, a company might have an existing relationship with their own insurance agent, and BlueIron will act as a wholesaler.
Some insurance brokers are paid fees in addition to commissions.
In general, broker fees must be reasonable and disclosed to the buyer. Fees may also be restricted in your state. Broker fees are frequently nonrefundable, so if you cancel your policy, you will not receive your money back unless your insurance broker was deceptive.
Independent agent vs. insurance broker
Insurance brokers and independent agents are frequently mistaken.
It’s easy to see why: both work with a variety of businesses and earn a commission. Independent agents, on the other hand, make their entire living from commissions.
Brokers represent the buyer, not the insurance companies. Independent agents represent the insurance companies. Agents can also bind policies or offer temporary coverage until a policy is finalized and issued. In most cases, an insurance broker will collaborate with an agent or insurer to bind a policy.