There’s no doubt that the insurance industry is tricky to navigate. That’s why insurance brokers are crucial in helping consumers pick and choose plans that are right for them.
According to the U.S. Bureau of Labor1, employment of insurance brokers is projected to grow 6% between 2021 to 2031. Additionally, a Research and Market report2 speculates that the global insurance brokers market will reach $113.99 billion by 2025.
Insurance brokers offer expert advice on insurance policies, help their clients manage risk, compare rates and prices, and provide peace of mind to their clients, making them valuable assets in the insurance field.
If you’re interested in becoming an insurance broker, our blog will explain more about the role of an insurance broker, their responsibilities and qualifications, why they’re important, and how they differ from an insurance agent.
What is an insurance broker?
An insurance broker is an intermediary between a consumer—be they an individual or an employer— and an insurance company to help the consumer find and purchase the best insurance policy that suits their needs.
Brokers can specialize in one insurance type, like life insurance or group health insurance plans, but they often offer advice on several forms of insurance. A broker can work independently or within an insurance brokerage firm.
Brokers sell insurance, but they don’t work for insurance companies. They work directly for their client, so their client can receive the best advice when considering insurance options.
Simply put, think of an insurance broker as a middleman. They aim to be the glue between individuals or business owners wanting an insurance plan and the companies providing the insurance product.
Brokers are well-informed in many types of insurance, including:
- Auto insurance
- Life insurance
- Disability insurance
- Homeowner and commercial insurance
- Health insurance
- Accident insurance
- Commercial inventory and contents insurance
- Business loss of income and workers' compensation
Brokers start by identifying their client’s personal and business needs as well as any risks. Then they make informed recommendations about the insurance needed, how much to buy, and provide the client with several quotes to compare.
Since brokers don’t represent insurance companies, they can’t complete insurance sales or bind coverage on behalf of an insurer. Once the client decides, they hand over the account to an insurer or insurance agent to complete the transaction.
Contrary to popular belief, using a broker has no added cost. Brokers make their money through commissions from insurance companies by selling insurance to their clients. Commissions typically range between 2% and 8% of the premium3, depending on their state’s regulations.
What are the responsibilities of an insurance broker?
An insurance broker has many roles and responsibilities, ranging from risk management to providing industry knowledge. Because an insurance broker can be independent or work within a firm, an individual broker's range of roles and responsibilities can vary.
Here are nine different roles and responsibilities of an insurance broker:
- Act as a liaison between the insurance carrier and the client
- Compare, negotiate, and sell insurance policies
- Help clients understand and manage risks
- Advise and consult with their clients to provide the best policies and annual premiums
- Handle administrative duties for their clients
- Schedule and attend meetings with their clients, the insurers, or both
- Keep accurate records
- Stay compliant in the insurance field by keeping their broker license current, learning new developments, and sharpening their skills
- Comply with all legal requirements in their jurisdiction
What qualifications does an insurance broker need?
To pursue a career path as an insurance broker, it’s best to start by earning a college degree in insurance, business, economics, or finance.
In addition to the education requirements, brokers must have an insurance license via the National Insurance Producer Registry4 to sell insurance products.
If you manage other brokers or agents in other states, you may also need a separate insurance broker license in those states. Similarly, if you choose to sell multiple types of insurance, you may need more than one license.
Most states also require a background check, fingerprints, and a specific number of training hours to take a licensing exam to begin the application process of receiving an insurance license. After obtaining a license, you typically must renew it regularly by completing required continuing education courses to stay compliant.
Why are insurance brokers important for consumers?
Brokers have a deep knowledge of the insurance marketplace. They’re experts in the complexities of insurance policies and effectively analyze the many different companies available. Brokers consider their client’s needs before recommending the purchase of any insurance policy.
But those are only a few reasons that an insurance broker is essential. Below we go into detail on a few more.
Consumers save on insurance rates and receive faster claim payouts
A broker works with several insurance companies to find the best deal for their client. They make carefully considered suggestions to serve their client’s interests to ensure they have the right policy for a budget-friendly price.
Additionally, since a broker has relationships with several insurance partners, they can negotiate competitive rates and add any available discounts.
In the event of a claim, a broker will help their client through the claim process. They can answer and serve as an advocate to make sure the payout is fair and delivered to the client in a reasonable time frame.
Get expert advice from an experienced industry professional
It’s an insurance broker’s job to provide their clients with personalized support so consumers can understand the insurance coverage options. A broker has extensive knowledge of insurance options and years of experience to draw from when consulting with a client, which comes in handy when navigating the tricky waters of insurance.
By providing expert advice, brokers help their clients obtain the best policy price and instill confidence and peace of mind. Shopping for and managing insurance coverage is usually less stressful and more comprehensive, with an insurance broker to help clear the way.
Clients are protected from dishonest conduct
As mentioned earlier, all brokers must have an insurance license to be compliant. This involves staying up to date in continued education, professional competence, ethical conduct, and insurance-related financial services. Working with a broker allows clients to confidently feel they will be treated fairly with their best interests represented.
It’s also essential that brokers remain impartial. Brokers can inform clients about loopholes and other potential policy pitfalls. Essentially, a broker works as an extension of their client’s business, so clients should receive an honest opinion they can trust.
What is the difference between an insurance agent and a broker?
Insurance agents and insurance brokers often get confused for one another. They have similarities, such as they both need a license to operate. While both work in the same industry, agents and brokers differ.
An insurance agent is employed by an insurance company to sell their products to consumers for a commission. An agent helps consumers select the right insurance to buy, but ultimately they represent the insurance company in the transaction.
The following are the two types of insurance agents:
- A captive insurance agent represents a single insurance company
- An independent agent typically represents more than one insurer
If you’re unsure if you want to be an insurance sales agent or a broker, there are a few considerations to keep in mind.
An insurance agent and an insurance broker compare in the following ways:
Represent the insurer
Represent the consumer
Can bind coverage
Can’t bind coverage
Receive a contract from the insurer outlining the products they can sell and for what commission rates, such as life insurance or annuities only
They’re under no contract, so they can solicit price quotes from multiple insurers
An insurance broker’s primary goal is to serve their client’s insurance needs. This includes recommending the best coverage at the best possible rate, answering questions, being an advocate, and putting their client’s interests first.
When considering becoming an insurance broker, it’s critical to fulfill education requirements, learn the basic job duties, and follow all state licensing requirements before getting started. By following the guidelines in this article, you’ll have a solid foundation to begin a rewarding career in the insurance industry.
This article was originally published on September 3, 2010. It was last updated on May 24, 2023.