An insurance agent represents an insurance company or insurer that pays the agent a commission for transacting business with the insurance company or insurer. An agent works for the insurance company and keeps his primary obligation on representing the companies that he writes insurance with. This is very different than an insurance broker who is a representative for the customer, the insurance buyer.
The difference between an Insurance Agent and an Insurance Broker is an important issue if there is a situation of claim and there is a reason to determine which professional is responsible for an error or omission. It’s very common in the Business of Insurance for insurance professional to work as both an agent for the insurance companies he or she is appointed to represent and as the representative for the insurance buyer–the customer.
There can be situations where there is a conflict of interest. An insurance agent represents the insurance company and has a responsibility to protect insurance company interests at the same time the agent has a duty to the insured customers.
The most important duty of an insurance agent is to follow the instructions of the insurance customer. It’s the policy owner’s responsibility to give the insurance agent information and instructions. When the insurance customer fails to provide clear and complete information, an agent has the right to make reasonable assumptions about the wishes of the insurance customer.
Many insurance customers expect an insurance agent to be an expert on every kind of risk or insurance available. Customers often assume the agent will advise them and point out possible exposures or investments. The truth is that it’s not possible for an ordinary insurance agent to be an expert in connection with every risk that can be insured. Instead, insurance agents rely on the customer they insure or other experts for appropriate policy limits and conditions.
Many Insurance Agents work independently and set up their own neighborhood office. Insurance agents must take classes and pass a state test before they are permitted to transact any insurance business. In most states there are at least two different licensing programs for Insurance. Life and Health and Property Casualty.
Once a person has taken the classes and passed the state license tests they must be “Appointed” or accepted by an insurance company that allows the agent to transact insurance business in return for a commission. Some Agents are considered “captive” and work for one insurance company, others are considered Independent and work with a variety of insurance companies that have appointed or approved an agent to do business.
Once an agent has been appointed or approved to transact insurance business with an Insurance company, the agent is given a certain “Binding Authority” from the insurance company. A new agent may only have authority to offer insurance on the spot up to a certain limit amount or time. Binding authority may also be limited to certain insurance products. Once an agent develops a strong relationship with an insurance company and has a proven track record of field underwriting the binding authority may be expanded.
Agents, generally take care of the insurance company’s customers, by keeping records and being the front line communication coordinator. The agent services the insurance customers account and will earn more commission for renewals. A good agent will want to keep good insurance customers and represent the Insurance Companies by clear and complete communications.
Related Blogs:
- Insurance Careers: Intro From Top to Bottom.
- What is the Business of Insurance?
- More about the Business of Insurance?
Glossary of Insurance Terms:
A | B | C | D | E | F | G | H | I | J-K | L | M | N | O | P | Q-R | S | T | U-V | W-Z
Families.com Blogs are for informational purposes only. Families.com assumes no responsibility for consumer choices. Consumers are reminded that it is their responsibility to research their choices properly and speak to a certified insurance professional prior to making any decision as important as an insurance purchase.