INSURANCE

An insurance broker (agent) sources (brokes) contracts of insurance on behalf of their customers.

INSURANCE BROKER AND INSURANCE AGENT

Insurance brokers can be best described as a kind of super-independent agent. Brokers can offer a whole host of insurance products for you to consider. Brokers are required to have a broker’s license which typically means the broker will have more education or experience than an agent.

Brokers also have a higher duty, in most states, to their clients. Brokers have the duty to analyze a business and secure correct and adequate coverage for the business. This is a higher duty than the pure administrative duty of the agent. However, this expertise comes at a price. Brokers typically charge an administrative fee or premium payments are higher when purchased through a broker.

Insurance agents are insurance professionals that serve as an intermediary between the insurance company and the insured. As a broad statement of law, an agent’s liability to their customers is administrative. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork. Agents have no duty to conduct a thorough examination of your business or to make sure you have appropriate coverage. Rather, it is your obligation to make sure you have purchased needed coverage.

Insurance agents can be either:

• Captive – A captive agent is an agent who works for only one company and is a "captive" of that company. A captive agent will sell policies only for that insurer.
• Independent – An independent agent is one who works as an agent for a variety of different insurers. An independent can produce policies from several insurers and offer some comparisons of different insurance policies.

INSURANCE BROKERAGE IN THE UNITED STATES

Insurance brokerage in the United States is also a regulated industry, with almost all states individually issuing brokerage licenses. Most states have reciprocity agreements whereby brokers from one state can become easily licensed in another. There are exceptions to this, most notably in the case of Hawaii, where all licensed brokers must live on the island.

Because of industry regulation, smaller brokerage firms can easily compete with larger ones, who are forbidden by law from providing their customers with rebates or other discounts on the policy prices of insurance companies. For this reason, the United States is home to many different notable insurance brokerage firms.

Brokers play a significant role in helping companies and individuals find property and casualty (liability); health and life 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 2 percent to 8 percent of premiums. Brokers provide services beyond insurance sales, such as assisting with employee enrollment and helping to resolve benefits issues.

INSURANCE BROKER VS. AGENT IN THE UNITED STATES

Though not an absolute separation; an 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. A broker 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.

INSURANCE BROKERAGE IN THE UK

The term 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 has been regulated by the Financial Services Authority since 14 January 2005. Any person broking insurance 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 Financial Services Authority regulation in 2001.

Insurance broking is carried out today by many types of organisations including traditional brokerages, Independent Financial Advisers (IFAs) and telephone or web-based firms.

In the United States, Certified Insurance Counselor (CIC) is an insurance agent professional certification designation. The CIC certification program was started by the National Alliance for Insurance Education & Research in Austin, Texas in 1969. Some CIC courses can be used to fulfill state continuing education requirements for licensing as an insurance agent.

The CIC program is for agency owners, producers, agents, brokers, and agency and company personnel.

To be eligible to attend CIC institutes and obtain the CIC designation, an individual must:

• be a licensed agent, broker, adjuster, or solicitor, or
• have at least two years of full-time experience in the insurance industry or as a risk management practitioner, or
• have served as a full-time insurance faculty member at an accredited college or university

FIVE INSTITUTES

There are five CIC institutes. Each institute is 2_1/2 days of coursework, followed by an optional exam. The CIC program is a continuing education program and a professional certification program. Any eligible individual may attend classes without taking the examinations or working toward the designation. Courses reflect the laws and regulations in the state in which the institute is held.

1. Personal lines institute addresses the insurance needs of individuals, families, and family members, and explains the complexities of state-specific personal lines forms.
2. Commercial casualty institute covers casualty exposures and essential coverage.
3. Commercial property institute covers ways to maximize coverage for various types of commercial property accounts.
4. Life and health institute provides the basic, essential background knowledge for property and casualty agents to succeed in the life and health insurance market.
5. Agency management institute covers the internal operations and factors necessary to run an agency. A case study is used throughout the program for practical application of the theories, methods, and procedures.

To become a designated CIC, the candidate must complete all five courses and pass the examinations within five calendar years. CIC designees make a commitment to update their CIC designations annually.

A CIC candidate may earn the CIC designation by completing any four CIC institutes plus one Certified Risk Managers (CRM) course. CIC and CRM designations can be earned by completing nine programs: any four of the CIC institutes and all five CRM courses (Principles of Risk Management, Analysis of Risk, Control of Risk, Financing of Risk, and Practice of Risk Management).