Insurance brokers act on behalf of their clients and provide advice in the interests of their clients. A broker will help you identify your individual or business risks to help you decide what to insure, and how to manage those risks in other ways. Brokers can help arrange and place the cover with the chosen insurer and can often provide advice on how to make the most of your insurance budget.
In the United States, insurance brokers are regulated by the individual U.S. states. Most states require anyone who sells, solicits, or negotiates insurance in that state to obtain an insurance broker license. In order to obtain a license, a person must take courses and pass an examination. An insurance broker also must submit an application to the state insurance regulator.
Insurance broker and insurance agent
Though not an absolute separation; an insurance agent is an insurance company’s representative. The agent represents the insurance carrier, not the insurance buyer. In contrast, an insurance broker represents the insured, generally has no contractual agreements with insurance carriers, and relies on common or direct methods of perfecting business transactions with insurance carriers. This can have a significant beneficial impact on insurance negotiations obtained through a broker, compared to those obtained from an agent.
Any person acting as an insurance agent or broker must be licensed to do so by the state or jurisdiction that the person is operating in. Whereas states previously would issue separate licenses for agents and brokers, most states now issue a single producer license regardless if the person is acting on behalf of the insured or insurer. The term insurance producers is used to reference both insurance agents and brokers.