You know you need life insurance but you are new to the purchase and the whole process. If you’re like most people, you go online and check out some sites…maybe run a few life quotes. Who owns these sites and what do they get out of it? Most are life insurance brokers like ourselves. Let’s look a little closer at what you can expect from a professional life insurance broker like us and what to avoid.
People use the term agent and broker interchangeably with life insurance. They’re pretty similar in terms of how they work. There’s a slight distinction but it shouldn’t really impact the consumer. An agent essentially works on behalf of the carriers but if they’re independent (and not «captured»), the net effect should be the same. A broker works on behalf of the client but still must have contractual obligations to the carriers. It’s probably 6 or half a dozen but the real issue comes down to the agent or broker in question. Now that we’ve gone through the semantics, let look at what’s really important with a life insurance broker or agent.
Coming from second generation life insurance brokers (please…hold the applause…or snickers), like with any profession, let’s start with competence. You have good and bad with any profession and life insurance brokers are no exception. Let’s face it…some are just really new to the business and will be good brokers later on. Insurance and especially life insurance is so complicated, convoluted, and multi-variable dependent that it really takes some old fashion time and energy spent in it to give good advice. I personally attest that there times early in my career that I just didn’t know of some wrinkle or option in a given situation. It all worked out well in the end but experience really is key to understanding life insurance options. Also, there are some people who just don’t want to keep up with new products, changes, and strategies as it pertains to comparing life insurance. Again, this is true in any profession and I’m sure you know a few people you work with that either make you sigh or turn red. Competence. Knowing what questions to ask, knowing what life insurance options address your needs, and then competently guiding the process to a successful conclusion. In a nutshell, that is what you want from a broker and our core strength at etermlifeinsurancequote.com is solely focused on these three goals.
Impartiality, honesty, and fairness are equally important in your life insurance broker. If you’re like me (maybe I’m a little suspicious by nature), my first thought in any purchase is whether the person helping me is acting in my best interests. I don’t know the world of frigerators, carburetors, or home mortgages. Is that really the best option for me at the best price or are they pushing this particular option because they get some kind of bonus, need to run down excessive inventory, or just don’t want to take the energy to really investigate what’s best? Tell me that’s not exactly the fear you have when making a new purchase. Again, maybe I’m too skeptical but it’s a legitimate concern that results from many transactions where the above was not in my favor. So let’s set the record straight.
We will try to find the best priced life insurance plans to best address your needs PERIOD. If you read through our term life insurance articles, you can see that we’re trying to give you the upper hand in the whole process of purchasing life insurance. Life insurance companies and a lot of life brokers love whole life…we don’t. We don’t think it make sense due to its cost. You’ll see that focus on YOUR interests on every page of our site. We are paid like travel agents so the rate is identical to you whether you go through us with our wealth of knowledge or direct to the big (should be in caps) life insurance company. There’s no incentive to us if you go with one plan or carrier or another so we’ll try to find the best one. In fact, to back this up, our term life insurance quoting engine puts the power in your hand and parses the best priced plans for your requirements instantly. I’ll be honest…we could make more money recommending whole life insurance but it’s not in your interest…so we don’t do it. We take the responsibility of being your life-long life insurance broker seriously and we feell it begins, continues, and ends by our acting in your best interest.
In the United Kingdom
Insurance broker became a regulated term under the Insurance Brokers (Registration) Act 1977 which was designed to thwart the bogus practices of firms holding themselves as brokers but in fact acting as representative of one or more favoured insurance companies. The term now has no legal definition following the repeal of the 1977 Act. The sale of general insurance was regulated by the Financial Services Authority from 14 January 2005 until 31 March 2013 and by the Financial Conduct Authority since 1 April 2013. Any person or firm authorized by the Authority can now call themselves an insurance broker.
Insurance brokerage is largely associated with general insurance (car, house etc.) rather than life insurance, although some brokers continued to provide investment and life insurance brokerage until the onset of more onerous regulation in 2001. This drove a more transparent regime based predominantly on up front negotiation of a fee for the provision of advice and/or services. This saw the splitting of intermediaries into two groups: general insurance intermediaries/brokers and independent financial advisers (IFAs) for life insurance, investments and pensions.
General insurance brokering is carried out today by many types of authorized organisations including traditional high street brokers and telephone or web-based firms.
In the United States
File:Accidents will happen William-H.-Watson-Universal-Star-Featurette-1922.webm
Accidents will happen (William H. Watson, 1922) is a slapstick silent film about the methods and mishaps of an American insurance broker. Collection EYE Film Institute Netherlands.
In the United States, insurance brokers are regulated by the individual U.S. states. Most states require anyone who sells, solicits, or negotiates insurance in that state to obtain an insurance broker license, with certain limited exceptions. This includes a business entity, the business entity’s officers or directors (the «sublicensees» through whom the business entity operates), and individual employees. In order to obtain a broker’s license, a person typically must take pre-licensing courses and pass an examination. An insurance broker also must submit an application (with an application fee) to the state insurance regulator in the state in which the applicant wishes to do business, who will determine whether the insurance broker has met all the state requirements and will typically do a background check to determine whether the applicant is considered trustworthy and competent. A criminal conviction, for example, may result in a state determining that the applicant is untrustworthy or incompetent. Some states also require applicants to submit fingerprints.
Once licensed, an insurance broker generally must take continuing education courses when their licenses reach a renewal date. For example, the state of California requires license renewals every 2 years, which is accomplished by completing continuing education courses. Most states have reciprocity agreements whereby brokers from one state can become easily licensed in another state. As a result of the federal Gramm-Leach-Bliley Act, most states have adopted uniform licensing laws, with 47 states being deemed reciprocal by the National Association of Insurance Commissioners. A state may revoke, suspend, or refuse to renew an insurance broker’s license if at any time the state determines (typically after notice and a hearing) that the broker has engaged in any activity that makes him untrustworthy or incompetent.
Because of industry regulation, smaller brokerage firms can easily compete with larger ones, and in most states, all insurance brokers generally are forbidden by law from providing their customers with rebates or inducements.
Insurance brokers play a significant role in helping companies and individuals procure property and casualty (liability) insurance, life insurance and annuities, and accident and health insurance. For example, research shows that brokers play a significant role in helping small employers find health insurance, particularly in more competitive markets. Average small group commissions range from two percent to eight percent of premiums. Brokers provide services beyond procuring insurance, such as providing risk assessments, insurance consulting services, insurance-related regulatory and legislative updates, claims assistance services, assisting with employee enrollment, and helping to resolve benefit issues. However, some states consider the provision of services that are unrelated to the insurance procured through the broker to be an impermissible rebate or inducement.
Negligence on the part of insurance brokers can have severe effects upon clients when they discover their insurance coverage is worthless, which in turn illustrates why retaining a competent insurance broker is so important. In one case, Near North Entertainment Insurance Services provided alternative rock band Third Eye Blind with a commercial general liability (CGL) insurance policy that excluded coverage for the «entertainment business.» After insurance coverage for a lawsuit was denied because Third Eye Blind was and is, after all, in the entertainment business, the California Court of Appeal ruled in a published opinion that the broker had a duty to advise the band it needed something more than a basic CGL policy.
In 2004, Eliot Spitzer found apparent cases of bid-rigging by the major brokers, where the brokers arranged with insurers to provide «fake» quotes in exchange for providing favorable risks amidst contingent commission arrangements. In 2008, AIG paid $125 million to settle with 9 states.
Commission and fees
In most states there is no requirement to disclose the commission of the broker to the customer, but in New York, a regulation («Regulation 194») was adopted in 2011 which required disclosure. Brokers or agents may decide to reveal their commission upon request.
In most states, agents cannot charge a fee in addition to their commission, although Texas is one of the exceptions.
Broker vs. agent
Though not an absolute separation; an insurance agent is an insurance company’s representative by way of agent-principal legal custom. The agent’s primary alliance is with the insurance carrier, not the insurance buyer. In contrast, an insurance broker represents the insured, generally has no contractual agreements with insurance carriers, and relies on common or direct methods of perfecting business transactions with insurance carriers. This can have a significant beneficial impact on insurance negotiations obtained through a broker (vs. those obtained from an agent).
Any person acting as an insurance agent or broker must be licensed to do so by the state or jurisdiction that the person is operating in. Whereas states previously would issue separate licenses for agents and brokers, most states now issue a single producer license regardless if the person is acting on behalf of the insured or insurer. The term insurance producers is used to reference both insurance agents and brokers.
In Australia, all insurance brokers are required under the Financial Services Reform Act 2001 to be licensed by the federal government’s Australian Securities and Investments Commission (ASIC). Reputable and experienced insurance brokers in Australia will generally also hold additional qualifications such as a certificate or diploma in financial services which requires the completion of in depth studies in a specific area, the most common being general insurance or insurance brokering.
Within Australia there are also a number of industry bodies that issue professional accreditations to members that comply with best standards of professional practice and integrity and maintain up to date skills and knowledge. The two main accreditations are the ANZIIF CIP (certified insurance professional) and NIBA QPIB (qualified practicing insurance broker) qualifications.
Dealing with an insurance broker as opposed to directly with an insurer is something many customers (particularly businesses) choose to do in Australia for reasons including: the ease of having the «shopping around done for them»; having the opportunity for premium funding which allows for larger insurance policies to be paid in installments rather than all at once; dealing with one broker for all policies from the car insurance to professional indemnity insurance rather than dealing directly with several insurers; and, the ease of having claims managed by the broker who deals directly with the insurer on the client’s behalf.