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)
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
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.
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:
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
binders documenting active insurance in lieu of policies in process.
of completed original policies & renewals within 45 days of
concerning limitations or exclusions.
billing of premiums with payment options.
claim processing & presentation to carriers.
of your insurance regularly to obtain improved costs & coverage.
during all regular business hours.
counsel on what coverages to buy.
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.)
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.
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.
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.