Insurance Agents, Insurance Producers, and Insurance Brokers: What’s the Difference?
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Insurance agents, insurance producers, and insurance brokers all play important roles in making the insurance industry work. Many people, however, aren’t sure exactly what the difference between them is. What do insurance agents do that insurance brokers don’t? What’s the role of brokers as compared to producers? For everyone who’s ever been confused about what these terms mean, we’ve put together a breakdown of what each of these three titles mean within the insurance industry.
What Is an Insurance Agent?
A licensed insurance agent, or producer, is someone who sells insurance on behalf of an insurance company. Insurance agents can either be “captive” agents (meaning the company they represent prohibits them from selling insurance from any other company) or independent agents (who represent more than one company, and are therefore able to sell insurance from multiple carriers). The most important distinction between an agent and a broker is that insurance agents work for the insurance companies; they sell products that the insurer is authorized to sell in their state.
In some states, insurance agents are officially called insurance producers. Despite the difference in names, the role they play is exactly the same. Whether someone is called an insurance producer or an insurance agent, it is their job to sell insurance coverage on behalf of an insurance company. Unlike the difference between insurance agents and insurance brokers, the difference between agent and producer is just using a different title for the same job.
What Is an Insurance Broker?
Insurance brokers are similar to independent agents, in that they offer insurance coverage from multiple carriers, but there is an important distinction between the two. Unlike insurance agents, brokers are not representatives hired by insurance carriers to represent them. Instead, brokers work on behalf of their clients (individual consumers). When a consumer hires an insurance broker, the broker will search through the many available plans and identify the one that best fits their customer’s needs.
Why the Difference Matters
When most people think of an insurance agent, they’re thinking of an insurance producer. While the distinctions between agent, broker, and producer may seem trivial, understanding what makes them different can help consumers have an easier time working their way through the system and getting coverage.
Another important reason to know the difference is that, depending on the state, the licensing requirements for each job can be slightly different. Insurance licensing is regulated at the state level, and some states require brokers to go through a slightly different licensing process than agents. If you’re pursuing a career in the insurance field, it’s critical to understand the differences between a broker and an agent so that you can be sure to get the correct license for whichever position you are pursuing.
If you want to know more about insurance agents, brokers, and insurance licensing requirements, contact America’s Professor today to enroll in one of our online insurance test prep courses. Give us a call at 800-870-3130.
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In my opinion, an insurance agent, broker, and insurance producer are different in the following ways: An insurance agent in some states represent the insurance company; and an insurance broker represents the client. I am in the State of Arizona and in 2002 wherein we used to have both insurance agent licensure and broker licensure. Both of these exams were done away with and now we have insurance producer licensure. All of the Arizona statutes were changed and now the term insurance producer has replaced the terms insurance agent and insurance broker in the Arizona insurance statutes (In Arizona we… Read more »
Hi David, Thanks for your comment. You made a great point which we try to make with every “general” type article we publish. It’s always a great idea to check with your local DOI. 🙂
I am currently licensed as a life agent in California and have a non-resident life license for Arizona. I would like to venture out on my own as a broker so that I’m not restricted to certain and have the flexibility of finding the best carriers for my clients. Are there any addition license I would need to be a broker or to open my own insurance office in Arizona and California?
Hi Mike, Yes you will need an Agency license and probably a few other things. You are best off to call the DOI Licensing Department in your state to get the specifics. Good luck!
I was approached by First Financial Security Insurance and World Financial Group/Transamerica. What are your thoughts between these two broker firms?
Hi Mike, Unfortunately I don’t really have any thoughts to give as our relationship these companies is so early in the process (only pre-licensing courses) that we don’t see the full picture. You might want to head over to Insurance-Forums.com and pose your questions. Good luck!
Thank you for this site. I am studying to take my Life Insurance License Exam. I have been studying from exam cram. But, this site has helped a lot also. Wish me luck!
Hello Gloria, Glad we could help! Good luck on your exam!
what is the difference between an agent/producer and a “Managing General Agent”?
Hello Le Daniels, So if you were supervising multiple agencies for an Insurer you would get a Managing General Agent (MGA) license in addition to your Property and Casualty (PC) license. In general a MGA is a next level PC Agent/Producer for an agency who is granted additional abilities. Typically we only see people asking about MGAs in Texas but it could be taking off in other states too. That person is kind on an expert in the field and can be called an MGA only if they get a license for it. Also, it’s most common that MGAs are… Read more »
Thanks!…and yes this has to do with Texas. The person we are dealing with ONLY has an MGA License and we are trying to figure out what that license allows him to do or not do versus a seller
Hi Le Daniels, For more information I would definitely call the Texas Department of Insurance (1-800-578-4677) and get it straight from authority but I believe they would also need a PC license to sell. Good luck!
Ok ok ok ??? No agent broker or producer how do I start a auto insurance company like state farm all state farmers and etc / become an auto insurer/CEO and then find/get an agent or broker to sell car insurance to people for me
Hi Tim, You will want to get your own license and then find someone to appoint you to sell their product. Often if you go to work with a captive company, like State Farm, they will put you in your own office at some point if you choose. Or you can go the independent agency route, get an agency license and find companies to sell their policies. You then could hire people to work for your agency. Keep in mind, there is usually a fairly large capital requirement if you are starting up your own independent agency right out of… Read more »
It ‘s really great to know. Thank you for sharing.
Thanks for the breakdown. I have a better understanding now.
Glad we could help!
If I want to sell health insurance as an independent, what type of license should I pursue?
Hello Julie, Typically you would want to get a Producer or Life license (whichever your state calls it) then find a company to work with. Some states allow you to only get a Health license but if that is not available you would need to get a Life and Health license (e.g., Texas). Good luck!
Can one be both an insurance agent and an insurance broker at the same time, but serving different clients for each category/branch?
Mary
Hi Mary, Usually you pick one route to follow. It’s not recommended to do both. You would open yourself up to a lot of potential conflict of interest legal issues.
What is the difference in an agents license and an adjusters license in P&C? Can an adjuster in Texas use their adjusters license to be an agent?
Hi Brian, Typically a Property and Casualty course with closely prepare you for Agent/Producer or Adjuster licensing exams. You then need to take the license exam for the specific job you what you want to do, selling as an Agent or being an Adjuster. Most adjusting companies will not allow you to hold both an Agent and Adjuster license as there are conflict of interest issues. So no, Adjusters can’t just switch and start selling insurance. Please give us a call if you have any other questions. Thanks!
[…] what is an insurance broker? An insurance agent is an employee of an insurance company. He or she is expected to understand the […]
[…] A licensed insurance agent/producer is someone who sells insurance on behalf of an insurance company. An insurance broker, on the other hand, works on behalf of their clients rather than on behalf of insurance companies (read more about the differences between an insurance agent/producer and broker here). […]
hello im getting confuse about a broker and an agent do agent need a broker to sell insurance
Hi Jameson, an Agent will be appointed by and an Insurer to sell their products. So the Agent gets paid a commission by the Insurer. A Broker will typically be working for the individual trying to purchase insurance and be paid by that person.
What is the difference between an insurance agency in California and an insurance agent also the difference between an insurance broker and insurance agency
Hi Doc, Agents work at an Agency so basically the office versus the individual. A Broker would be at the individual level too. Does that answer your question? Please give us a call if you have any other questions. Thanks and have a great day!
[…] Read more about the differences between an insurance agent/producer and broker here). […]
thanks for the information.
Can a person work as an adjuster then switch to agent or vice versa
Hello Shaon, Good question! We sometimes see Agents/Producers hold an Adjuster license but not adjust. We rarely see someone who’s primarily an Adjuster be able to hold a Agent/Producer license because it creates a conflict of interest. If you are working as an Independent Adjuster and being sent to adjust a claim, the company you are adjusting for wouldn’t want to worry about you selling their client your insurance. If you have both licenses I think the adjusting network you work with would have you retire your Agent/Producer license or put it on hold with the state. Good luck!
I appreciate that you explained that an insurance broker works with individual consumers and offer insurance coverage. I used to think that an insurance broker and an insurance agent did the same job. Thank you for helping me understand the difference between an insurance agent and a producer.
I’m an Independent Insurance Agent/Producer. I want to know that if I switched Companies because I believe as my fiduciary obligation that one offers better benefits for their agents and their customers; but yet both offer one of the same carriers. What happens if I sell the policy of the same carrier with my new company? Or is there a waiting period as to when I can sell their product with my new company?
Hi Olie, I believe you can start selling with your new company and same carrier right away but if you are selling to existing customers you need to sell them a better policy. Good luck!
I would like to know if an Insurance Agent/Producer can sell insurance without a broker?
Hello Carolina, You must be appointed by an Insurance Carrier to sell their products. If you go to work at a Captive Agency you will be appointed by them to sell their products. If you go to work at an Independent Agency you will have to be appointed by all the Insurance Carriers you want to sell products from. So as long as you are licensed and appointed by an Insurance Carrier to sell their products, you are good.
Thank you.
What is an aggregate producer and a composite producer?
Hello Mylee, I’m not familiar with those terms either. Do you have more context for them?
What is the difference between an Insurance Broker and an Independent Agent? Both of these licenses allow selling insurance policies from multiple carriers. Obviously, the Independent Agent, like a Broker, will also look out for the best interests of his/her client and for all intents and purposes be representing the client, just like a Broker. I just don’t see any difference in the two, other than the title.
Hi Dan, As mentioned above the day-to-day is going to be very similar. You are always going to try and sell the policy that best fits the needs of the person you are selling it to. But, you have a fiduciary responsibility to the Carrier as an Agent and to the Client as a Broker.
Seems like you would have fiduciary duties to the client regardless of whether you’re an agent or broker. In California, the license for P&C is called ” Broker-Agent.”
Hi Dan, I think you always want to do what is best for the client but no, you do not always have a fiduciary responsibility to the client. I’d say the terms get thrown around interchangeably but in reality, there is a difference in the definition as mentioned in this article.
Hello, I am in NEW JERSEY and about to select entity for studying HEALTH and LIFE. A. Interested in learning what is it required of me to be able to open an office as a “licensed producer” selling multiple INSURANCE COMPANIES. B. What establishes a PRODUCER becoming a BROKER?
Hi Angel, When it comes to compliance, you are always going to want to talk to your state’s Department of Insurance – Licensing Division (609-292-7272). They will let you know the exact process for your state with required licenses and fees to make sure the process is completed correctly. Good luck!
So I have a question I’m hoping someone can answer. I’m a licensed insurance producer in MA. The agency I work for doesn’t pay me the commission for new business that I write. Not like a new policy on an existing account, but business specifically referred to me or otherwise someone that I’ve done all the work on the account since the first time they contacted us. Is it my right to get that commission? Or does my boss have the right to collect it himself as an “agency account”? As a side note – said agency is owned by… Read more »
Hi Court, This is a “real world” question probably better to be posted over at Insurance-Forums.com (we are more experienced with “test world”). They will have better answers over them I’m sure. Good luck!
Hi! I’m a newly licensed health and life agent. I recently joined a company with over 40 different providers that they sell. Though it’s early, I’m strongly considering joining the company that a college friend is apart of. I was wondering if you could enlighten me on what to look for in my contract with my current company that would stipulate me from joining a new company, like any specifics? I am reading through my contract and I have not found anything but I have heard of these type of situations in the past (agent attempts to join new company… Read more »
Hi John, Thanks for your question but I would say it would be better answered over at Insurance Forums as they have a lot more “Real World” experience. We primarily deal with “Test World” pre-license type questions. Good luck!