Difference between an Insurance Broker and Agent

Whether you believe it or not, there are a lot of small business owners that need immediate funding their business needs. While it works, they also miss an important element which is, business insurance policies. And there are a couple of ways to get this, which is either through an insurance broker or agent.

While the brokers and agents do almost the same services and functions, there are key differences between these two.

Agent vs. Broker

First things first, brokers and agents do act as the intermediary or the middleperson between your insurers and you or the insurance buyer. Both entities have the legal duty of helping you to acquire the right coverage at reasonable price points. Each should secure a license in distributing the kind of insurance that the agent or broker is offering. Lastly, each of them should follow regulations that are enforced by your state’s insurance department.

What’s an Agent?

Agents actually act as the representatives of the insurance companies and might be independent or captive. In the latter, this means that the agent is representing a single insurer while independent agents are representing multiple insurers. Examples of captive agents are those representing State Farm or Farmers Insurance.

Insurance agency is selling policies on behalf of the insurers that given it an appointment. The appointment is basically contractual agreement that is specifying the products that the agency might sell as well as the commission that the insurer would pay for each.

 It is describing the binding authority of the agency or in other words, its authority in initiating the policy.


Brokers are representing their clients. They’re not appointed by any insurers and don’t have any authorities to bind coverage. They are soliciting insurance policies and/or quotes form insurers by means of submitting the completed applications on buyer’s end. To start a policy, the broker should acquire a binder that’s signed by underwriter at insurer.

Brokers could be wholesale or retail. If the latter, they are directly interacting with the insurance buyers. If they can’t get insurance coverage that the customer requires from the standard insurer, then they may reach out to a wholesale broker. In relation to wholesale brokers, these act as intermediaries between insurers and retail brokers. Many of the surplus line brokers who are arranging coverage for hazardous or unusual risks. For example, surplus line broker may help in securing product liability insurance for motorcycle manufacturer or for auto liability coverage for long-haul truckers.

Posted by: Bolat Masaev on