Broker

What is an insurance broker?

An insurance broker is a person from whom you can buy insurance. Brokers sell insurance, but they don’t work for insurance companies. Instead, they shop around to multiple insurance companies on behalf of their clients. Some brokers work independently, others work together in brokerage firms.

Most brokers and brokerage firms offer their clients more than one kind of insurance. For example, a broker offering personal lines of insurance can usually help their clients get home, car, life, and travel insurance. A commercial insurance broker would specialize in the insurance needs of businesses rather than individuals.

What does an insurance broker do?

The main role of an insurance broker is to find their clients the best insurance policy at the best price. When you hire a broker, they’ll comb through insurance offerings from many companies to find the right match. Insurance brokers are professionals who must pass exams and keep up regular continuing education in order to hold a license to work in their province.

Upon meeting with a new client, the first thing a broker will do is determine what their client’s insurance needs are. Depending on the type of insurance the client is shopping for, they might ask a few questions, or they might ask for documentation in the form of inspection reports, appraisals, property valuations, and so on.

What does that mean?

With that information in hand, the broker starts shopping around. Brokers work with multiple insurance companies—sometimes dozens—so they have quite a few options. Once the broker identifies the right insurance policy and provider, they present the quote to their client who can decide to buy or not to buy. If the client buys, the insurance provider will pay the broker a commission.

Brokers also provide information and support, even after the insurance purchase is complete. On behalf of their customers, brokers help coordinate premium payments, request policy changes, and make recommendations come renewal time. Some brokers offer assistance with the claims process, though the actual claim still has to be made directly with the insurance provider.

How do insurance brokers make money?

Brokers earn commission on the policies that they sell. Once a broker’s customer has purchased a policy, the insurance company that provided it will pay the broker a commission for bringing them business. The commission is based on the premium amount and can be as high as 20%, depending on the type of insurance.

Some brokers also charge a brokerage fee, which is paid by the client, rather than the insurance company. Brokerage fees are not common practice, however. In many jurisdictions, they aren’t even allowed. Insurance brokers are regulated provincially, so check with your province’s regulatory body if you’re curious about the rules where you live.

What is the difference between an insurance agent and a broker?

Agents and brokers are often confused for each other. From the outside, they don’t seem to be all that different; they both sell insurance. The difference is that an agent represents an insurance company (or sometimes multiple insurance companies), and only sells that company’s policies to customers. Brokers don’t work for insurance companies. They work for their clients, and shop around to find the right coverage.

It may seem like brokers are the best way to buy insurance, but many people prefer to deal directly with the insurance provider. Buying directly from an agent is often faster, since agents can frequently issue new policies within minutes. Brokers need to file an application with the insurer by email or fax and wait for it the insurance company to approve it.

Of course, some insurance companies don’t even have agents, instead working exclusively through brokerages. For example, if you buy car insurance in BC, you can’t buy a policy directly from ICBC — you’ll always go through a broker.

There’s also a third method of insurance shopping that’s picking up speed: buying online. Some companies, like Square One, allow customers to purchase policies online, which takes brokers and agents out of the picture altogether (though Square One also has a whole team of licensed agents ready to help out).

Do insurance brokers handle claims?

Since insurance brokers don’t work for the insurance company, they don’t have the authority to manage claims. Someone who buys insurance through a broker still needs to speak with their actual insurer in the event of a claim.

Some insurance brokers offer claims advice services. While they can’t manage claims, they can provide advice to their customers about the claims process. For example, they can advise about what types of claims would be covered, and what deductibles might apply.

What is a sub-broker in insurance?

A sub-broker is an intermediary broker working between their authorized insurance company and another insurance broker. Essentially, if a broker can’t arrange coverage for their client through their usual network of insurers, they may try to place their client with another broker — which becomes a sub-broker.

Sub-brokers have the same legal and professional responsibilities as primary brokers, including licensing requirements.

Looking for another insurance definition? Look it up in The Insurance Glossary, home to dozens of easy-to-follow definitions for the most common insurance terms. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.