The distinction between agents and brokers has all but disappeared as a practical matter. Historically, agents were considered to represent an insurance company and act on its behalf, while brokers were seen as representing the insurance buyer. Independent agents or brokers now provide services and act in ways which render these categories mostly unrecognizable, except when litigation raises the issue. (Keep in mind, however, that captive agent-employees of the direct writers are still joined legally with their carriers)

The single most important caveat in finding a broker-agent:  There is no substitute for a good referral from someone in a business situation similar to yours, someone whose judgment you respect.  Even if you resort to calling a competitor you don't know but do respect, you'll probably find him/her willing. Failing this type of referral, contact the local agents/brokers' association (or their web site) for referral, then ask your prospective broker for names of existing clients for reference.  Broker-agent referrals given you by internet quoting services are much like the 800 numbers advertised on TV for lawyers, dentists or other professionals.  These are usually purely sales arrangements, with the subscribing broker having merely registered or agreed to pay certain fees for the sales leads. The responsibility for qualifying the broker is entirely yours.

Your state insurance regulatory agency makes licensing details available on the Internet. If so, you can see which insurance companies have granted an agent direct appointments, which will give you some indication of his clout in the insurance marketplace.

The other considerations have to do with the size, complexity and maturity of your business, along with the basic service requirements which any reputable broker-agent should be willing to guarantee:  At a minimum, irrespective of the size of your operations, you should expect services to include:

  • An initial and thereafter annual profile or quote detailing the type and amounts of insurance, including deductibles, costs and/or rates, carriers, carrier financial rating, policy numbers, and expiration dates.
  • Written binders documenting active insurance in lieu of policies in process.
  • Delivery of completed original policies & renewals within 45 days of effective date.
  • Details concerning limitations or exclusions.
  • Advance billing of premiums with payment options.
  • Routine claim processing & presentation to carriers.
  • Bidding of your insurance regularly to obtain improved costs & coverage.
  • Availability during all regular business hours.
  • Competent counsel on what coverages to buy.

Most broker-agents maintain professional liability insurance.  If, however, your broker-agent has no means to respond for any of his/her errors or mistakes, your own risk of financial ruin from his errors may equal or exceed what you're trying to insure in the first place. This is a consideration which cannot be overlooked.  If you check state appointment records & see a solid list of carriers who have given him/her an appointment, this is a fairly good indication that errors & omissions insurance is in place.   (Because insurance carriers require it.)  

If you utilize the captive agent of a direct-writing carrier, you normally cannot expect any bidding to be done. (He can only offer his principal company), and captive agents may be less likely to assist you directly with claims. Captive agents may not not have primary allegiance to you, and unlike independents, generally are considered legally duty-bound to their insurance company, not the policyholder. Lastly, direct-writers tend to do best with "Commodity" type insurance products which are fairly well standardized. These factors must be weighed in considering their offerings.  In a sense, this is a Price Club-vs-Regular Retailer decision and depends entirely on your individual situation. Direct-writers frequently have extremely low commercial vehicle and small business insurance prices. Their appetite typically does not include professional liability insurance or unique/unusual risks or needs which do not readily fit their existing product line. . (Certain of their agents quietly maintain informal alliances with independents or "wholesale" insurance sellers for the purpose of locating commercial insurance products not available via their own carriers. Some principal carriers permit the practice, while others strictly prohibit it.)

If insurance is a material cost, you should invite an independent broker-agent or a different captive to bid for your business every other year or so, just to see what improvements may be had.  (Commercial insurance rates and products are generally quite fluid and things can change dramatically in a very short time.) Do not, however, waste five hours bidding out your $500 business insurance premium solely for the sake of trying to save fifty bucks.

If you have multi-state operations, clearly you must choose a broker-agent with offices and licensing in all states. Individual state insurance regulators are incredibly territorial and while they grudgingly allow "nonresident" activity subject to special licensing, policyholders can get caught up in disputes. There is even the remote possibility that you could end up on the hook for surplus lines taxes and fees if they are not paid by a resident agent. The best way to avoid such conflicts is to choose a broker with offices and licensing in the states where you operate.

If your premium is in the five digit & higher range, look to one of the better-known regional or national brokers. If it is in the three to five digit range, find a smaller local broker-agent who will value your account highly and be more likely to give you more and better services.


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