Buying insurance can be complex, even for seasoned business people. You need to know what type of insurance you need for your business, whether for a one-off job or event or on an ongoing basis. Then, you need to find out what level of coverage is available to you, which is a big job in itself. Plus, assessing which insurers offer the best value while making sure their coverage is well-suited to your needs can also be a hefty task.

While Thimble makes buying insurance as simple as possible, for particularly complex situations, insurance agents and brokers can also help. But what is the difference between an insurance agent and a broker? And what is an independent insurance agent? We detail some of the differences below.

Insurance agent vs. broker: What’s the difference?

Insurance agents and brokers help professionals and business owners find the right insurance coverage for their needs from the appropriate insurer and at a price that is agreeable to both.

Agents represent one or more insurance companies directly, and typically have the authority to complete the transaction between customers and insurance companies (known as binding the insurance coverage). They do this once a product has been chosen and the cost of the coverage, or the insurance premium, has been agreed upon. Agents can therefore issue a Certificate of Insurance (COI)
immediately to the customer so that they are covered until the insurer has issued the formal policy documents.

Insurance brokers, on the other hand, represent your interests. Brokers act on behalf of consumers to obtain quotes from a number of insurance companies, but they don’t typically have the authority to bind coverage (in other words, complete the transaction). Customers may therefore have to wait a short time until the insurer issues a COI. Brokers must go directly to the insurance company to complete the transaction. In fact, Thimble has a Broker Portal that allows brokers to bind policies on behalf of clients online, in just 60 seconds.

In addition, some insurance companies are known as direct writers, which means they only offer their products through insurance agents or sell directly to consumers without using an agent as an intermediary. Brokers typically cannot access these companies’ products when sourcing coverage for their customers.

What is an insurance agent?

Insurance agents — whether they are individuals or companies — represent insurance companies rather than working for the customer. However, they can assist you, as a small business owner, with choosing the right insurance coverage for your needs.

Insurance agents can be either captive, meaning they represent a single insurance company, or independent, which means they represent multiple companies.

Insurance agents are authorized by the companies they work with to complete the transaction between a customer and an insurance company once the customer has decided which insurance product to buy and is ready to enter into a contract with a particular insurance provider.

Captive insurance agents are employees of the insurance company they represent and can only quote on policies offered by that company.

Independent insurance agents, as the name suggests, are independent of the companies whose insurance policies they sell and are not obliged to offer the products of a single company. Independent agents have authority from each company they work with to complete insurance transactions on behalf of that company.

Insurance agents, whether captive or independent, do not directly provide or underwrite their own insurance coverage — they can only offer them on behalf of the insurance companies they represent.

What is an insurance broker?

An insurance broker is similar to an insurance agent in that they connect you, the insurance buyer, with the insurance company. Brokers work for the customer, not the insurer, however.

Brokers will assist you in finding you the best insurance coverage for your particular requirements but do not provide their own products, sourcing them instead from insurers.

Where a broker differs most from an insurance agent is that they are an intermediary between customers and insurance companies. They do not directly represent an insurer or insurers, and thus typically cannot complete insurance purchases with insurers or bind the coverage on behalf of their customers (unless they are additionally licensed as an insurance agent).

Instead, brokers source details of insurance coverage, also known as the policy’s terms and conditions, and premium costs from a range of insurance companies on behalf of their customers before referring the buyer to their chosen insurance vendor, who will then issue the policy and COIs.

How do agents and brokers make money?

Insurance agents make money in two ways. Captive agents typically receive a base salary from the insurance company they represent and then receive additional compensation for every insurance product they sell.

Independent insurance agents work primarily on a commission basis and so will only earn money if they successfully place coverage with an insurer on behalf of a customer. Independent agents typically receive a higher commission for a successful purchase than a captive agent because, unlike captive agents, independent agents do not earn a base salary from the insurance company.

Insurance brokers work on a fee or commission basis – and in some cases both. Fee-based brokers charge consumers a negotiated flat amount for their services. The commission a broker earns from placing coverage on behalf of their customer with a particular insurer is usually a percentage of the premium paid for the coverage. In some cases, if it is allowed by a state’s laws, a broker may collect both fees from the consumer as well as commissions from a company.

When to use an insurance agent vs. an insurance broker

Much like an insurance broker, independent insurance agents work with a number of insurance companies and are therefore able to offer greater flexibility on price, the range of products, and the scope of coverage available with specific insurance products than a captive agent.

Because independent insurance agents have close and often long-standing relationships with the insurers they represent, they may be able to give customers a more in-depth understanding of the products their insurance partners are offering.

Agents can also give clients immediate insurance coverage through their ability to bind coverage directly. For a one-off or a subscription product, giving insurance coverage for an hour, a day, a week, or on a monthly basis, this speed of purchase can be a distinct advantage when using an independent insurance agent.

Remember, however, that even independent insurance agents represent the insurers, not the customer. Furthermore, they may not be authorized to offer all of the insurance products available from the particular insurers they represent.

Brokers, on the other hand, are able to change their selection of insurers from time to time, potentially giving access to a wider range of insurance products and more competitively-priced coverage. However, brokers — and therefore their customers — might not enjoy the benefits derived from the closer and longer-standing relationships between independent insurance agents and their insurance partners.

It is worth repeating that brokers work for you, the customer in the transaction, rather than the insurer, so will arguably try to get the best deal for their client rather than for the insurance company. Because they are independent of the insurers they represent, brokers are also free to explore other insurance companies if the products offered to the customer do not meet their client’s needs or pricing expectations.

Making insurance radically simple

Whether you use an independent insurance agent or a broker to purchase your insurance coverage, the outcome should be the same. The coverage should be tailored to the needs of your business or profession. The period of coverage should be suited to the way you work. That’s game-changing flexibility.

When you need coverage for your business, we’ve got your back. With Thimble, get the coverage you need today!