What’s the difference between an insurance broker and agent?
If you’re looking for health insurance, you’ll soon find out that there are not only many plans to choose from, but different distribution channels as well. You can buy directly from an insurance company, through an agent who sells plans on behalf of the insurer or through a broker who finds and compares medical insurance coverage for you. But unless you’re part of the insurance industry, you probably won’t know what sets these options apart.
Fret not, we’ll help you understand the key differences between an insurance broker and insurance agent in this Pacific Prime UK article.
Buying insurance directly from an insurer
Insurance companies are only allowed to sell their own policies. When shopping for insurance, buyers tend to assume that buying directly from an insurance company will be the cheapest and easiest option. While that is possible, the direct approach tends to only work to your advantage if you’re already familiar with insurance products and the insurance market.
To begin with, it can be difficult for an HR team, business owner or individual to research and compare health insurance plans without an advisor’s insight. The reason for this is that it takes a lot of time to understand, and become familiar with, all the options available to decide if they’re an ideal fit. Without expert advice, there’s a higher chance that you’ll choose the wrong plan for your staff and business, which can ultimately be an expensive mistake. A good agent or broker can provide expert advice at no additional cost.
Even though it’s possible to get a cheaper premium without the help of an intermediary, that often isn’t the case. One reason for this is that insurance companies rely on third parties to bring them business. If the insurance company offers plans that are much cheaper than what they offer clients through intermediaries, those agents or brokers will be less motivated to sell their products.
What’s more, they are likely to stop selling that insurer’s policies entirely. This could dramatically reduce the number of potential customers, leaving them with the expensive task of increasing investment in their own efforts and sales teams.
What does an insurance agent do?
An insurance agent has the authority to sell on the insurers’ behalf. They can even adjust coverage on occasion – typically with the objective of increasing insurer profit and sales. So what’s the difference between insurance broker vs agent, you might ask? The main features that set an agent apart from a broker include:
- Agents are either independent or captive. Independent agents represent several insurers, whereas captive agents can only represent one.
- An agent sells insurance products on behalf of the insurer. Their goal is to find suitable coverage for clients from the insurers they work with.
- In some circumstances, agents can bind coverage with the insurers they represent, which lets buyers get coverage before the insurer has even processed the application and issued policy documents.
- An agent earns a stable commission from the insurance companies they’re contracted with. Some captive agents receive salaries.
What does an insurance broker do?
Insurance broker responsibilities include using their expertise to understand what their client needs, and helping them choose the right insurance plan at the best possible price. Unlike an agent, a broker’s job is to act in the client’s best interest as opposed to the insurers’. In addition, brokers:
- Are independent of any insurance company or agent, and typically offer a wide variety of plans from various insurers
- Will prioritise clients’ interests over their own
- Make unbiased recommendations based on the clients’ insurance needs, and may also leverage their close relationships with insurance companies to negotiate conditions or premiums
- Help clients understand aspects of their policy and point out things that they may not have thought of
The way brokers operate can vary significantly. For instance, smaller brokers may only provide a review of the top plans and help you narrow down a plan that matches your needs. Conversely, larger brokers are capable of offering value-added services, such as renewal support and claims assistance.
Moreover, brokers are specialists in particular products (e.g. group health insurance) and can provide extra services according to their area of expertise. This is why HR administrators, in particular, appreciate a comprehensive insurance broker. From claims analysis to employee orientation and everything in between, full-service brokers do all the legwork for you so you can focus on more important projects.
Insurance broker vs agent vs insurer benefits
When deciding whether to purchase insurance through an insurance broker, agent or insurer, it’s best to think about the main benefits of each option.
Broker benefits
- Clients’ needs come first
- Range of insurer options
- Expertise in various insurers and policies
- Unbiased advice on insurance matters
- Additional client support (e.g. claims analysis, claims assistance)
- Larger brokers can negotiate benefits and premiums
Agent benefits
- Some agents can bind coverage
- Expertise in the insurer they represent and the policies they sell
- Direct relationship with the insurance company
- Back office support
Insurer benefits
- The premium may be lower (on occasion)
- Feeling of control since you’re responsible for researching and reviewing the options
How Pacific Prime UK can help
Pacific Prime UK is a leading broker of choice, equipped with a team of expert advisors who work towards the goal of simplifying insurance. We ensure that all of our clients, whether corporate, individual or family, find the best insurance solution for their needs and budget. Our partnerships with all major insurers also help us negotiate premiums, benefits and conditions when necessary.
Contact us today for impartial insurance advice and a free quote.
Jantra curates and reports on the results of Pacific Prime’s monthly newsletters, as well as manages Pacific Prime’s Deputy Global CEO’s LinkedIn posts. Complemented by her background in business writing, Jantra’s passion for health, insurance, and employee benefits helps her create engaging content - no matter how complex the subject is.
Growing up as a third-culture kid has given her a multicultural perspective that helps her relate to expats and their families while 8 years of working remotely have given her unique insight into hybrid work arrangements and enthusiasm for employee benefits.
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