Insurance Broker vs Carrier: Which Should You Choose?
Kimberlee has over 20 years of experience as a financial consultant and insurance agency owner. Her expertise is featured across Fit Small Business life insurance and business insurance content.
This article is part of a larger series on General Liability Insurance.
There is more than one way to buy a commercial general liability insurance policy. You can buy it directly from the carrier, through an agent, or via a broker. The carrier is responsible for maintaining the terms of the insurance contract, also known as a policy. An agent works on behalf of an insurance carrier while a broker works on behalf of the client to find the best policy for the best possible rate.
It’s important to understand how you’re shopping for insurance because it could mean significantly different options are presented to you.
What Is an Insurance Broker?
An insurance broker works for you, the client. This means that they take the relevant information needed to find you a policy and will shop that information among various carriers to get what’s right for you.
The job of the broker is to help you evaluate the best policy for your needs. They become trusted advisors who understand the risk of your business and find a policy that best addresses that risk. Unlike a carrier or agent, a broker cannot bind coverage, which means they have to submit an application on your behalf to the carrier to get the policy approved and effective.
Pros & Cons of Insurance Brokers
| PROS | CONS |
|---|---|
| Work for the client | May charge fees to write the policy |
| Shop among many carriers | Unable to bind coverage taking longer to get coverage |
| Able to find the best rates | They don’t service the policies they source |
As with anything, there are pros and cons to consider when thinking about whether or not you want to use a broker or go directly to a carrier. For small business owners who know the company they want to work with because they trust the reputation, it might be easier to go directly to the carrier since you’ll get a policy faster in many cases. However, because brokers are working for you, it could be worth the wait to see if the broker can find an equally strong carrier with a cheaper policy for your needs.
What’s the Difference Between Insurance Agents & Brokers?
The terms insurance agent and insurance broker are often conflated, but they are different. Agents are paid a commission by the carrier to act on their behalf. The agent can bind coverage, making getting a policy quick and easy. However, the agent is not going to compare that policy with other carriers like the broker will.
The insurance broker seeks the best carrier for his client’s needs. This means that the broker is not limited to one or two carriers he has an appointment with. Brokers also get paid a commission, but the commission can come from any number of carriers, depending on where the policy ultimately is sourced. This gives brokers a more objective approach to helping business owners find the right insurance. It’s important to know that some brokers do charge a fee when placing the business with a carrier, and this fee is not refundable if you cancel the policy early, although your premium would be.
What Is an Insurance Carrier?
An insurance carrier is a provider of specific types of insurance policies—like general liability insurance. It generally employs representatives and agents to solicit and sell insurance. Agents can work directly for the insurance carrier, or they can be independent agents that are appointed by the carrier. As an independent agent, they maintain their own costs of doing business and are considered self-employed but serve as extensions of the carrier.
The carrier is responsible for all aspects of the insurance policy that include underwriting, servicing, and claims. When a business owner has an issue, they will likely be getting help directly from the carrier, as is the case during the claims process. Even independent agents will defer the processing of claims and many other issues directly to the carrier.
Pros & Cons of Insurance Carriers
| PROS | CONS |
|---|---|
| Often best explains features of the policy that brokers don’t note | Doesn’t allow for price comparison unless you do additional work |
| Bind coverage quickly | Makes decisions based on the bottom line |
| Less confusion because there are no other options | No discount for direct purchase |
When a business owner works directly with a carrier, it is usually because they have a strong respect for the brand. They trust that the policy and its subsequent coverage will take care of them properly during a loss. It’s also possible that people go directly to the carrier thinking that they will save money by doing so. The reality is that the carrier’s rates are fixed, and they won’t provide any discount because you go with them directly.
How Carriers Sell Insurance
Insurance carriers sell insurance through four different means. At the end of the day, the policy will be priced the same no matter how you get the policy unless you have a broker who tacks on an additional fee.
The four ways carriers sell insurance policies include:
- Direct sales: Use representatives to fulfill policy orders but rarely solicits business via representatives
- Captive agents: These agents work with only one insurance carrier but are independent business owners themselves and get paid a commission to solicit and sell for the carrier
- Independent agents: May have multiple appointments with various carriers to solicit and sell insurance based on limited shopping capabilities
- Brokers: Are small business owners that shop policies among various carriers to find the best deal for clients
When to Use an Insurance Broker
Use an insurance broker if you are unsure where to start when it comes to getting your business insurance or want someone to help you find the best price. They’ll take the pertinent details about your business to help you identify your exact needs. Then, they’ll fulfill those needs by getting quotes from multiple carriers to see which option best suits your business.
CoverWallet is an online insurance broker that does just that. They utilize smart technology to help small business owners identify their needs and then recommend a policy—all within a few minutes.
When to Use an Insurance Carrier
Go directly with an insurance carrier if you want to be sure you get a policy with a provider that you trust. Perhaps you have had a good prior experience with the carrier or are interested based on a trusted recommendation. Either way, going directly to the carrier can save you time in the long run since the carrier can bind coverage at the end of the phone call.
The Hartford is a small business insurance expert and direct carrier. You can get a policy quoted within minutes and have a bound policy just seconds after that. Best of all, The Hartford is a competitive carrier that many brokers use because their pricing satisfies most industry needs. Don’t hesitate to get a quote today.
Bottom Line
It can be overwhelming to get a business insurance policy. Understanding the resources offered by both insurance carriers and brokers can make a world of difference in simplifying the process. Whether you go direct or through a broker, always make sure the carrier you use is rated highly with a good reputation.
