What’s The Difference Between an Agent and Broker?

What Is The Difference?

Have you ever heard of an insurance broker? Do you know how they differ from an insurance agent? Do you know what they offer? Well before you begin your hunt for good and affordable insurance, why don’t you stop by your local brokers office… your hunt may just end early.

AGENT:

Agents work for one insurance company and only offer that companies products. This means you get offered one price and you accept or decline. When purchasing your policy, you deal with the sales team…when requesting a change, you are dealing with the customer service department…and when reporting a claim, you will be talking to the claims department. Their system is created for their efficiency, you will not talk to the same person who sold you the policy because you now belong to a different division.

Today, insurance agents rarely earn a commission. They get paid a set amount and don’t lose anything if their clients cancel. In a sense, they work for the company and are trying to reach their quota. In Ontario, they are required to hold an OTL (Other than Life) license which only qualifies them to act as an agent.

BROKER:

Insurance brokers have contracts with multiple insurance companies, can bind coverage with any of these insurers and do not represent any one company… they are independent. They operate a system where they input one set of information and receive prices from all the companies they work with.  Buying your policy, requesting changes and reporting a claim are all done through the same person. Your insurance broker is usually local and therefore accessible.  The broker’s goal is to establish a relationship with the client and maintain it (golfing).

Brokers work on full commission. What does this mean for you? The broker serves you… and not a company. You are his/her business and they want to retain you. There is no quota to be met and bonuses do not exist. Their services are completely free to the client. In Ontario, they are required to pass an extensive RIBO (Registered Insurance Brokers of Ontario) exam and are obligated to complete extra hours of continuing education every year. They are subject to a strict code of conduct and can be suspended if they act against it. Successful completion of the RIBO exam exempts an applicant from writing an OTL exam if he or she chooses to sell as an agent.

A broker has a higher duty of care to it’s clients and is trusted to be an expert in the field. He or she has a responsibility to provide the customer with the correct insurance up to their needs. The customer still has authority to decline a certain coverage but this must be signed off. Insurance brokers are your advisers.

SUMMARY:

Agents work for one company, brokers have many contracted insurers. Agents work for the company, brokers work for the client. Agents usually work on a salary while brokers earn a commission. Both agent and broker services are free to the client. Agents only handle sales and the client will not be able to contact them again, brokers handle sales, changes, claims and any general questions clients may have. Agents need an OTL license and brokers need the RIBO license. Agents can offer one price, brokers can offer and choose from many prices.

If you have any questions about what services a broker offers, are studying for the RIBO exam or thinking about becoming a broker feel free to email or call me.

Update: I have many future brokers calling and asking for advice regarding passing their RIBO License. If you ever do have any questions I will be happy to help you out! 🙂

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