Mon. Mar 1st, 2021

Who are an insurance broker and an insurance agent, what is the difference between them, how to become an insurance broker or an agent?

The concepts of an insurance broker and an insurance agent are consonants, so people often do not see the difference. In fact, the methods and purposes of their work are different. Let’s see what insurance brokers and insurance agents are and why they are not the same thing at all.

Who is an insurance broker

An insurance broker is an intermediary who helps you select an insurer and specific insurance products. He assesses the proposals, compares, offers the best option, in the process helps with consultations, information support, preparation of the necessary documents, ensures the safety of money if contributions go through him. 

The broker, as an independent expert, acts in the interests of the client, therefore, it is from him that he receives remuneration for his services. It is believed that the larger the insurance broker, the larger his network, the lower his commissions because large market players can earn on sales volumes.

The broker must have a license to provide insurance services. In addition, the broker’s work is subject to official rules and requirements that protect clients:

  • the document that regulates and serves as a guideline is called the “Basic standard for the protection of the rights and interests of individuals and legal entities – recipients of financial services provided by members of self-regulatory organizations that unite insurance brokers”;
  • also, the broker’s duties are spelled out in the law “On the organization of insurance business in the Russian Federation”.

Who is an insurance agent

An insurance agent is a natural or legal person who sells insurance policies. An agent can be not only one who earns exclusively from this activity, but also one for whom this income is one of many (for example, a bank or a car dealer). Often this is convenient for everyone: for the agent organization itself, for the insurance company, and for the client, who may not waste time searching, but on the spot, literally without leaving the cash register, get advice and issue a policy.

As a broker, an agent is interested in selling a large number of insurances. The agent also provides consulting services, helps with paperwork, and can accept payment.

The difference between an agent and a broker is not only that the agent does not need a license. If the broker works in the interests of the client and, as a rule, it is from him that he receives remuneration, the agent receives a commission from the insurance company. 

Agents can be full-time, single-member, and multi-member.

  • Regular ones are those who are on the staff of the insurance company (they are what you see if you come to the office to issue a policy): as a rule, such an intermediary works for a small salary, and receives the main income for drawing up contracts.
  • There is no mono-mandate agent in the state, but this does not prevent the sale of policies. He sells products to a specific insurance company and receives a commission from them for the transactions.
  • Multi-member intermediaries sell the products of several insurance companies at once, but in order not to be diffused, they can choose only one or two types of insurance (for example, specialize exclusively in policies related to the protection of car owners’ liability).
  • Sometimes speculation is possible on this basis: the agent can convince the client that it is about the best and most profitable offer only because of his personal interest in the commission. We will leave the question of decency outside the brackets, but it is important for the client to understand what exactly manages the agent and whether there is a choice among several similar insurance products.

Also, the agent, if provided by the contract, can partially pay compensation in the event of an insured event. But this already depends solely on the details of the contract.

What is the difference?

We compared the main points in the table to show the difference between insurance agents and brokers.

How to become an insurance broker or agent

Becoming an insurance broker is not an easy task. You cannot do without preliminary training and knowledge of the material, legislation, advantages, and disadvantages of individual insurance companies. For this activity, you will need to open an individual entrepreneur or LLC. That is, ideally, it is worthwhile to deal with this issue in advance: to understand which form, which taxation will be more profitable. After registering your business, you will definitely have to get a license. Only after passing these stages can you start working as an insurance broker. Then you can conclude contracts with insurance companies with which the broker is going to cooperate. All this will take a lot of time, but after that, you can scale up your activities and become a large brand.

Becoming an insurance agent is easy. For example, there are online platforms where it is enough to register and complete an elementary training course to be able to sell policies and receive a commission. You can also conclude contracts with insurance companies yourself, but this will take longer.

For those who want to become an insurance broker or agent, it is important to understand: both are responsible for the safety of personal data of clients, documents, and money, for the accuracy of information about insurance products. Therefore, it is worth working in this area only with preliminary preparation, consciously.

Insurance broker ratings

There are many ratings of insurance brokers on the Internet. As a rule, they are compiled based on the following parameters:

  • the opportunity, thanks to cooperation with a large number of insurance companies, to choose the optimal product, exactly the one that the client needs;
  • prices;
  • cooperation with reliable insurance companies;
  • experience;
  • fast service;
  • information from press releases of the Bank of Russia;
  • quality of service.

On the website of the Central Bank, you can see archived reports on insurance brokerage activities. These statistics are devoted to numbers: they are devoid of emotions and do not take into account such subjective indicators as the quality of service, but they are quite informative. If you have decided on a broker or are just choosing between them, this data from the Central Bank may be useful. Also, the Central Bank has a register of financial organizations, where you can see, including information about the broker.

There is no registration or ratings of insurance agents: there can be a lot of them. 

Why do you need insurance brokers and agents?

Clients are not always able to independently understand all the variety of offers that exist on the market. And it is even more difficult to compare all possible proposals, realizing their advantages and disadvantages. It is difficult for an insurer to compare himself with competitors: it is not in his interests. But brokers and agents (if the agent cooperates with more than one insurer) may well assess the picture as a whole and offer the best option. 

Brokers and agents are needed not only by clients but also by insurers, because they supply a client base. A person who is satisfied with the service and compensation will recommend the company to his friends. Choice and competition among insurance companies develop the market, and it is good for everyone.

Of course, if you clearly know what kind of product you need and have decided on an insurer, it makes sense to contact him directly, especially since discounts or special promotions are possible, thanks to which you can save money. Sometimes intermediaries are ready to make a discount at the expense of part of their remuneration, but the insurer itself has more room for maneuver and discounts in most cases.

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