BuySide, a publication from the Wall Street Journal, recently published an article asking the headline question, “What Is an Insurance Broker—and Do You Need One?”
The article, appropriately subtitled, “Get help determining how much insurance coverage you need without any of the legwork,” intends to educate consumers regarding the difference between independent “brokers” and “captive” agents. The article presents, in part, the following explanation:
Do I need an insurance broker?
If you need several insurance policies, you may benefit from working with an insurance broker. A broker can help you devise a plan that protects all of your assets in the most cost-effective way, Holeman says.
You may also want to use an insurance broker if you need affordable coverage for your car or home quickly. As insurance carriers are jacking up rates, declining to renew some policies and even not issuing new policies in high-risk states, it can be difficult to shop for insurance right now. Brokers are tuned in to the insurance marketplace and can evaluate all of your available options to keep costs down and avoid a lapse in coverage.
Speed is the primary benefit of working with a broker, says Sean Lovison, a New Jersey-based certified financial planner. It’s especially helpful when you’re looking to update a policy or switch carriers and a broker has your information on file. “That is one of the major advantages of using a broker, because when you’re on your own and you have to build these quotes, it is a huge pain in the [rear] to do,” he adds.
It is important to note that what the Wall Street Journal is describing as a “broker” is synonymous with how we refer to our own agency, as an “independent agent” or “agency.” The contrast is what’s known as a “captive agent,” such as an Allstate agent or a State Farm agent, who only represents a single insurance carrier.
As the author goes on to clarify, “The primary difference between a broker and a [captive] agent is who they work for. In general, brokers have a duty to the consumer, rather than an insurance company.”
Your Interests at Heart
As we’ve written in the past, there is a big difference between independent agents and what are these “captive” agents — representatives who only represent the single carrier. “An independent agent represents multiple carriers,” says Jim Barr, Vice President of Gompers, Cornish and Barr. “How this benefits the client is that we are able to shop insurance products and policies to various insurance providers, so that we can get the best possible coverage at the most affordable rates.
“And we do all of the labor to quote and underwrite, so the client doesn’t have to do any of the legwork of finding the right policy. Then, as independent representatives of the client — working in their interests, not the insurance companies’ — we are able to provide honest analysis and consultative recommendations for the client to consider, most of whom are not insurance experts.”
He adds, “Our clients appreciate us walking through the options with them and explaining the advantages of one policy over another in easy to understand terms.”
To read the article in its entirety, continue here. And to learn more about why we prefer to “do the shopping for you,” read this short article by our Personal Lines Manager Lauren Dallas.