What’s the Difference Between Insurance Companies, Agents and Brokers?


July 7th, 2021

Believe it or not, insurance companies, insurance agents and insurance brokers aren’t the same thing. If this is news to you, don’t worry — misconceptions about the differences between these three insurance providers are common among consumers. But if you’re searching for an insurance provider, learning the differences between companies, agents and brokers is key to ensuring you find the best insurance solution for your situation.

What Is an Insurance Company?

What are insurance companies, and what do they do? An insurance company provides insurance coverage for consumers and businesses to protect them from the costs of natural disasters and accidents. An insurance company will assess an individual’s or business’s risk and then charge a premium based on their level of risk. For example, if you live in an area that is prone to wild fires, you may pay a higher premium to insure your home.

The roles of an insurance company are to:

  • Issue policies
  • Provide financial backing for insurance coverage
  • Pay claims

Insurance companies will collect a premium from you for the insurance policy, and if you suffer damages from an insured event, the company will pay out the agreed-upon amount specified in your policy. Insurance companies are constructed to be able to pay out these amounts while also making a profit. When an insurance company has a surplus of funds from premiums, it will safely invest this money to generate income.

Insurance Agency vs. Company

What is the difference between an insurance company and an agency? What about an insurance company and a broker? Simply, agents and brokers in insurance are intermediaries between companies and consumers. An insurance company appoints several insurance agencies. Insurance companies are providers of the product, while agencies are providers of the service, distributing the product to consumers.

Pros and Cons of an Insurance Company

What are the pros and cons of an insurance company?

Pros

The following is one of the most significant pros of choosing an insurance company as your provider:

  • Direct provider: An insurance company is the provider of an insurance policy. If you don’t want to deal with a middleman, you may want to purchase a policy directly from an insurance company.

Cons

The cons of choosing an insurance company as your provider include:

  • Impersonal service: You won’t receive the individualized service from an insurance company that you can receive from an agent or broker. If you want to work with someone who takes your unique needs into consideration, you may want to work with an agent or broker instead.
  • Limited options: When you buy insurance from a single insurance company, you only have access to the options they provide you.

What Is an Insurance Agency?

What do insurance agents do? Historically, these agents represent an insurance company or multiple insurance companies to the public. An agent provides insurance buyers with information about the products and options offered by companies. As an insurance buyer, you can then choose from the policies and options available to you through your agent. 

The duties of an insurance agent are to:

  • Act as an intermediary between the insurance company and the insurance buyer.
  • Help their client find the best coverage options.
  • Find the best premium rates for a client.

Agents are contractually obligated to offer policies and contracts that meet certain guidelines. These guidelines are determined through contractual agreements between the insurance companies and the insurance agents.

Agents can either be captive agents or independent agents. Captive agents represent a single insurance carrier, while independent agents represent multiple insurance companies. Independent agents can compare policies from several carriers to find the best terms and options for you.

Insurance Agent vs. Broker

What is the difference between an insurance agent and a broker? While both agents and brokers work with insurance companies and insurance buyers, they differ in who they represent during the purchasing process. An insurance agent represents each of the insurance carriers they work with, while an insurance broker represents the insurance buyer.

Pros and Cons of an Insurance Agency

What are the pros and cons of an insurance agency?

Pros

Why use an independent insurance agent? The benefits of choosing an insurance agent include:

  • Personalized attention: You’ll get more personalized service from an agency because they’re smaller than an insurance company.
  • Better policy options: When you work with an independent agent, they can compare different insurance companies to find you the best policy.
  • No cost: You don’t have to pay an hourly fee or a consulting fee to work with an insurance agent. You’ll also pay the same price whether you purchase your policy through an insurance agent or directly from the insurance company.

 

Cons

The cons of choosing an agency as your insurance provider include:

  • Limited support: An independent agency receives less support from the insurance companies they represent because they aren’t exclusive to one insurance company. This means what an insurance agency can offer you may be limited.

 

What Is an Insurance Broker?

What does an insurance broker do? Traditionally, insurance brokers represented the public to insurance companies. Brokers specialize in risk management and insurance and act as intermediaries between insurance buyers and companies.

Insurance brokers help their clients by:

  • Picking the carrier
  • Choosing the coverage
  • Arranging pricing
  • Arranging financing

So, who do insurance brokers represent? Insurance brokers represent insurance buyers, meaning they work as the client’s advocate. They use their knowledge and expertise to assess your situation and ensure your policy will address your insurance needs.

While an agent represents insurance companies, brokers represent the consumers. Since brokers don’t represent companies, they can provide unbiased recommendations to their clients.

Pros and Cons of an Insurance Broker

What are the pros and cons of an insurance broker?

Pros

The pros of choosing a broker as your insurance provider are that they:

  • Act in the client’s best interest: Service from a broker is personalized and honest. Because a broker represents you rather than a single insurance company, you can trust you’ll be receiving unbiased information and recommendations. Additionally, a broker will provide you with full disclosure on their commission rates.
  • Possess knowledge on a variety of topics: An insurance broker knows about the rates and options offered by several different insurance carriers, along with an abundance of knowledge about the insurance industry.
  • Provide better deals on costs: Because a broker isn’t obligated to sell one insurance carrier’s product, they can provide you with several options and find the most favorable terms for you.

 

Cons

What are the disadvantages of insurance brokers? The cons of choosing an agency as your insurance provider include:

  • Commission based: Brokers are generally paid based on commission, so this may affect which policies they recommend to you.
  • Quality varies per brokerage firm: Not every insurance broker offers the same quality of service, so you may want to shop around before choosing to work with a brokerage.

Keep in mind the pros and cons of working with an insurance broker when choosing an insurance provider.

Why You Should Choose Gunn-Mowery for Your Insurance Needs

Gunn-Mowery offers the best of both worlds as both an insurance agency and an insurance broker. While we have contractual obligations to represent certain carriers, we also sell products as brokers for which we don’t have contracts with the carrier. We protect and care for our clients first, regardless of our historical and contractual obligations. 

At Gunn-Mowery, we offer the Upside of Insurance. Each day, we strive to put out customers first, improve out technical knowledge and maintain our integrity.

If you want personalized service from an insurance provider who can find the most favorable terms for you, then an insurance agency and broker may be the right option for you. Contact us today at Gunn-Mowery to get the upside of insurance.