What’s the Difference Between an Insurance Broker and an Insurance Agent?
Anyone interested in life insurance is taking a responsible step to a more secure future. However, it’s not always easy to know where to start. Many people in Ontario find themselves unsure about their insurance options. In particular, it’s quite common for people to have some confusion about the differences between an insurance broker and an insurance agent.
There are some similarities between brokers and agents. For example, both brokers and agents need an appropriate license to distribute their particular type of insurance. Both also act as an intermediary between insurers and insurance buyers. However, there are some distinct and important differences which one needs to consider carefully. It can be best understood by first examining the role of each profession. From there, it’s easier to compare the two directly.
Insurance agents and general relationships with insurers
An insurance agent can be understood by considering their relationships with insurers. Consider the case of two people interested in licensed life insurance agents in Ontario. The first goes in to talk to an agent and is informed that they represent a single insurer. It is known as a captive agent.
Now consider the case of the other person looking for licensed life insurance agents in Ontario. He or she might find the agent suggesting options with multiple insurers. It is typical when the agent is considered independent. This difference is another reason why people find the distinction between agents and brokers so confusing. There are often multiple categories, even within the same field.
In this case, the example person looking for licensed life insurance agents in Ontario has found the two main choices. Captive, with a single insurer. Or independent, meaning the agent works independently from an only insurer. It might make some people assume that either of these is always going to be the best choice. However, it’s somewhat more complicated than that.
Captive agents sometimes benefit from a close relationship with a single insurer. It can give them greater flexibility in lowering costs. At the same time, an independent agent might be able to shop around for the best deal. Neither option is inherently better than the other. It’s best to look at the two types of agents as different. It’s somewhat akin to judging apples and oranges.
Brokers and their unique position within the industry
An insurance broker operates in a very different way from either of the two examples of an agent. A broker acts more directly as a representative of their client. There’s a considerable amount of differences to be found in this area of the industry as well. However, it doesn’t fit into strict categorization as neatly as with agents.
One should instead think of brokers as people with specialized knowledge in various subjects. Some insurance brokers specialize in life insurance, for example. They might have extra connections within the industry that could pave the way for a good deal.
Direct comparisons between agents and brokers
The differences between insurance agents and brokers should be more transparent by this point. In short, an agent has direct connections to one or more insurers. While a broker essentially acts in the place of his client. In that capacity, he brokers a deal with insurers. An agent’s advantage comes from deals they might gain through their direct connections. However, a broker’s main advantage is that they can work with a multitude of different insurers.
It means that a higher tier broker such as My Insurance Broker can mostly find the best deal out of a vast range of insurers. It usually means savings in comparison to the other options. However, it’s also important to remember that planning is an essential part of the process. It’s always best to start looking for insurance as early as possible in order to mitigate risks properly. One of the most significant advantages of a broker is the amount of choice which goes with it. And by starting sooner rather than later, one can get the most out of that option.