What does an insurance agent do?

The Agent

With few exceptions, the marketing mechanism in the insurance industry revolves around the agent; however, their role varies in different lines of insurance. In the property and liability insurance field, the agent is “an individual authorized to create, terminate, and modify contracts of insurance.” In the area of life insurance, however, the agent’s power is somewhat more limited. Life insurance agents are appointed with the authorization to solicit and deliver insurance contracts; however, they cannot, as can the property and liability agent, “bind” the insurance company to risk.

The insurance agent is first and foremost the representative of the insurance company. An insurance broker, in contrast, is a representative of the insured. Although serving as the insured agent, the broker typically receives compensation in the form of a commission from the company. The fact that the broker is not an insurance agent means that they do not have the power to bind the company. The broker merely solicits business from clients and then places the industry with an insurer. Brokers represent an essential segment of the insurance marketing mechanism, particularly in large cities, where they control large parts of the market. In some instances, agents also act as brokers, placing coverage through the agents of companies they do not represent.

Historically, brokers rarely operated in life insurance because most life insurers accepted business only from their appointed agents. Many life insurance producers work as brokers, placing life insurance with various insurers rather than with a single company. Although life insurance agents do not have binding authority, the distinction between an agent and a broker can still be important in the life insurance field. Any information given to the agent of an in- insurance company is considered to have been given to the insurer. The insurer is presumed to know relevant facts known to its agent. This may have relevance in situations where there is a question regarding the insured’s disclosure of information pertinent to the underwriting decision. Because the broker is a representative of the insured rather than the company, information provided to the broker is not attributed to the company.

Consultants and Financial Planners

In addition to insurance agents and brokers, there are a growing number of risk management and insurance consultants who do not represent insurers or sell insurance but offer their services on a fee basis. Many states regulate the activities of these consultants and require that they are licensed.

There has been a rapid growth in the financial planning profession in the personal lines field, which focuses on the broad spectrum of an individual’s or family’s economic goals. It encompasses budgeting, planned accumulation of wealth, risk management, and tax minimization.

Because the protection of assets is a cornerstone of a financial plan, financial planners have become an essential source of advice on personal risk management and insurance, especially for wealthy members of society. Although anyone can call him- or herself a financial planner, only persons who have met specific educational standards may use one of the financial planning industry’s professional designations.