Understanding Key Differences Between Insurance Agents and Insurance Brokers


Employers often wonder does the workers compensation agent or broker work for them or does the agent / broker work for the insurance company?  If an issue develops with the workers compensation insurance company, will the agent, broker be there to assist you as the employer in resolving the issue, or will the agent ,broker repeat what the insurance company says?

As both insurance agents and insurance brokers sell insurance to the public, many people use the terms “agent” and “broker” interchangeably.  They think of them as one and the same. There are some subtle, but important differences between an agent and a broker. [WCx]
The insurance broker is an independent business that sells insurance products for various companies. The insurance agent can be either an independent agent or a company agent.  The independent agent, like the broker, will sell insurance policies for multiple companies. While the company agent, also referred to as a captive agent, sells insurance policies for a single insurance company. 
Both the agent and the broker act as intermediaries between the client (the employer) and the insurance company.  They are both responsible for the proper processing of the application for insurance, the various forms and collecting, and submitting the premium to the insurance company. Large domestic and multi-national companies use insurance brokers to handle their insurance needs which are complex, with multiple types of insurance.
The difference between an independent agent and a broker is a matter of degree.  A pure agent will sell the insurance policy and perform the administrative functions.  The broker in some states will have a different license than the insurance agent, representing more experience, more education or both.  Brokers often offer a wider variety of insurance products.  Brokers will often have the expertise to analyze employer business needs and make recommendations on how to provide the coverage needed.  Brokers cover the cost of the higher level of expertise by adding an administrative fee to the workers compensation policy in the form of a higher premium. If they place sufficient volume with an insurance company, the commission they receive is higher from the insurance company. In all states, insurance agents and brokers need to be licensed.
A good agent or a good broker will educate the client ( the employer) any time there is a question or a concern about what  insurance coverage is needed. By providing you with information, they will guide in making the best decision for your company. The good agent or broker will never make the decisions for you, but give the information to make the best decision for your company.
The independent agent and the broker will place your insurance business with the insurance company(s) that can best provide your company the workers compensation or other insurance products that are right for the company. The insurance contract is arranged by the agent or broker or between your company and the insurance company.  The agent or broker is not a party to the contract.
Often the greatest difference between an agent and a broker can be seen when a dispute arises between the employer and the insurance company.  The captive agent is an employee or agent of the insurance company and will toe the company line.  The independent agent and the broker represent the client, the employer. In all situations the insurance policy language will prevail.  When the insurance policy is ambiguous and does not clearly address the situation between the employer and the insurer, the independent agent and the broker have the responsibility and the obligation to represent the interest of the employer. 
Brokers and independent agents run into trouble when they allow loyalties to shift to the insurance company because of concern for maintaining business relationships with the insurer.  Brokers and agents should work in the best interest of the client, the employer, even when it could be to their own detriment.
Whether a captive agent, independent agent or broker, they each have a duty of due diligence and attention to the suitability of the insurance policy they are arranging for you.  Each should be looking out for the employer interest and using their expertise to provide your company with the workers compensation insurance coverage that is right.

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Manage Your Workers Compensation: Reduce Costs 20-50% www.WCManual.com. Contact: RShafer@ReduceYourWorkersComp.com.

Our WORKERS COMP BOOK:  www.WCManual.com
WORK COMP CALCULATOR:  www.LowerWC.com/calculator.php

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact

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