The differences between insurance "agents" and "brokers" have become so blurred in recent years that the modern trend is to do away with the distinction altogether, and to instead employ the term "insurance producer" for anyone selling insurance.  Nevertheless, as a practical matter, there remain important distinctions between the two.

 
An insurance "agent" is a person that has entered into an "agency contract" with a particular insurance company to sell insurance.  There are two types of agents, "exclusive and/or captive agents" and "non-exclusive and/or independent agents."  An "exclusive agent" sells insurance for one company only, while a "non-exclusive" agent, who is generally an employee of an independent insurance agency, is capable of selling insurance for several insurance companies, thereby offering some price and coverage comparisons.  Regardless of the distinction, however, all agents represent the insurance company they are selling for.
 

Meanwhile, an insurance "broker" does not sell insurance for a particular insurance company.  Rather, a broker represents the customer who is seeking insurance, and, thus, will approach several insurance companies in an attempt to find coverage.  As a result, a broker is sometimes referred to as a super independent agent, often capable of providing a broader range of insurance options than an agent.  Nevertheless, one draw back is that while an agent is given the authority under an agency contract to bind coverage, that is, to legally obligate an insurance company to provide coverage, a broker is not.  A broker can only present his or her client's information to the insurance company, and, if the company agrees, it will bind the coverage.
 

The key distinction between insurance agents and brokers remains their allegiance.  While agents represent the insurance company, brokers represent the customer.  Consequently, as a broad statement of law, the duties of agents to their customers are normally limited to timely and accurately processing forms, and procuring the insurance requested.  Agents generally have no duty to conduct an examination of a customer's insurance needs, or to make sure appropriate coverage is obtained.  On the other hand, in most states, brokers are considered to have a higher duty to their customer, which may include the duty to analyze the customer's insurance needs and to secure correct and adequate coverage.  These extra services usually come at a price; however, as the premium payments are typically higher when insurance is purchased through a broker.

This article has been received from James O'Connor