The terms Agent and Broker are sometimes used in the same context, but in reality, they are quite different. Both do act as a liaison between the insured and the insurance company, but the main difference is who they represent.
An insurance agent works for the insurance company. They can represent one or more insurance companies and acts as an extension of those companies. They are authorized to bind or initiate coverage on behalf of the insured.
There are two types agents: Captive and Independent. A Captive agent sells insurance for one specific insurance company. An Independent agent sells insurance for multiple insurance companies. In essence, they do the ‘shopping’ for you.
An insurance broker works for their clients. They are an advocate and work in the best interest of their client, not the insurance company.
There are typically two types of brokers: Generalists and Specialists. Generalists do not restrict themselves to certain industries or lines of business and sometimes consider themselves as a “one stop shop”. They can insure gas stations, restaurants and even nonprofits. With their book of business being so broad, it may be difficult for them to have the necessary knowledge and expertise into a particular industry or business, especially ones that are complex or have high risk factors.
A specialty broker does just that; they specialize or have a niche in a particular line of business or industry. They have access to a variety of markets, comparing multiple programs side by side. They generally have stronger relationships with underwriters and have a unique ability to negotiate for better terms and premiums. They will also have a better understanding of the exposures and various risks associated with a particular industry or business and can better recommend the specialized insurance solutions needed.