Jeffrey Wade
Insurance agents are typically considered independent contractors, but there has been debate over whether they should be classified as regular employees. In 2017, a federal judge ruled that thousands of insurance agents were employees, not contractors, based on the company's control over their work. This ruling was made in the context of a specific case and may not apply universally. GEICO, a private insurance company, has a history of providing insurance services to federal government employees and offers special programs for federal employees. The Federal Insurance Office (FIO) in the US monitors the insurance sector but does not employ insurance agents.
| Characteristics | Values |
|---|---|
| Role | Insurance agents act as mediators between insurance companies and clients. |
| Licensing | Every state, along with the District of Columbia and U.S. territories, has an insurance commission that licenses insurance agents. |
| Licensing Requirements | In most states, licenses are issued to applicants who complete specified courses and pass state exams. Most states also require agents to take continuing education courses. |
| Types | "Captive" agents work exclusively for one insurance company, while independent agents can represent multiple companies. |
| Regulation | The Financial Industry Regulatory Authority (FINRA) regulates insurance agents who sell securities and other financial products. |
| Salary | The median annual wage for insurance sales agents was $60,370 in May 2024. |
| Employment Outlook | Employment of insurance sales agents is projected to grow 6% from 2023 to 2023, faster than the average for all occupations. |
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What You'll Learn
- Insurance agents are licensed and regulated by state insurance commissions
- Agents can be captive or independent
- Agents must complete specific courses and pass state exams to obtain a license
- Agents may sell securities and other financial products with additional licensing
- Insurance agents act as mediators between insurance companies and clients
Insurance agents are licensed and regulated by state insurance commissions
Insurance agents are licensed professionals who act as mediators between insurance companies and clients. They sell, seek out, and negotiate insurance policies for their clients and provide expert advice on the types of insurance policies that best meet their clients' needs. Every state in the US, along with the District of Columbia and US territories, has an insurance commission that licenses insurance agents and insurance companies operating within its jurisdiction. These state insurance commissions also impose sales and marketing rules and require companies to file financial reports to assess their ability to honour claims.
The process of obtaining a license varies from state to state. In most states, licenses are issued only to applicants who complete specific courses and pass state exams covering insurance fundamentals and state insurance laws. For example, the state of California requires insurance brokers to renew their licenses every two years by completing continuing education courses. Most states have reciprocity agreements, making it easier for brokers from one state to become licensed in another.
To sell certain insurance products that are considered securities, such as variable annuities or variable life insurance policies, agents must also be licensed as registered financial professionals and comply with the Financial Industry Regulatory Authority (FINRA) rules. FINRA offers two types of exams for agents who want to sell financial products: the Series 6 exam and the Series 7 exam, the latter being the main FINRA series license.
While insurance agents are licensed and regulated by state insurance commissions in the US, it is worth noting that the structure may differ in other countries. For example, in Australia, insurance brokers are required to be licensed by the federal government's Australian Securities and Investments Commission (ASIC).
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Agents can be captive or independent
Insurance agents help individuals and companies obtain life, health, or property insurance policies and other insurance products. They are licensed salespersons who sell one or more types of insurance and help clients choose the best plans for their needs.
On the other hand, independent agents work with multiple insurance companies and can sell policies from a variety of providers. They may be self-employed or work for an independent insurance agency or brokerage. They have access to a wider range of insurance products, which allows them to seek out the best policies for their clients' needs. Independent agents typically have higher earning potential as they make higher commissions per sale than captive agents. However, they may not have specialized knowledge about a particular company's products, and they may need to provide their own startup capital, pay for business expenses, and arrange benefits.
Both captive and independent agents need to be licensed by their state insurance commission. Most states require agents to complete specific courses and pass exams covering insurance fundamentals, state insurance laws, and industry procedures. Some states also mandate continuing education courses on topics like insurance laws, consumer protection, ethics, and technical details of insurance policies.
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Agents must complete specific courses and pass state exams to obtain a license
Insurance agents are licensed professionals who sell, seek out, or negotiate insurance for compensation. They act as mediators between insurance companies and clients, helping the latter understand their insurance needs and find the best policies to meet those needs. These professionals can help individuals and companies obtain life, health, or property insurance policies, as well as other insurance products.
To become licensed, insurance agents must complete specific courses and pass state exams. In most states, licenses are issued only to applicants who have completed specified courses and passed state exams covering insurance fundamentals and state insurance laws. These exams ensure that agents have a solid understanding of the industry and can provide sound advice to their clients.
Each state, along with the District of Columbia and U.S. territories, has an insurance commission that licenses insurance agents doing business within its jurisdiction. These state insurance commissions also impose sales and marketing rules and require companies to file financial reports to assess their ability to honour claims.
While the specific requirements may vary by state, most state licensing authorities require agents to take continuing education courses to maintain their licenses. These courses focus on topics such as insurance laws, consumer protection, ethics, and the technical details of various insurance policies. For example, the state of California requires license renewals every two years, which can be accomplished by completing continuing education courses.
In addition to state licensing requirements, insurance agents who sell products considered securities, such as variable annuity contracts or variable life insurance policies, must also be licensed as registered financial professionals. They must comply with regulations set by the Financial Industry Regulatory Authority (FINRA) and pass the relevant exams, such as the Series 6 or Series 7 exams, to sell specific financial products.
By completing the necessary courses and exams, insurance agents ensure they have the knowledge and skills to provide valuable advice and services to their clients, helping them navigate the complex world of insurance and make informed decisions about their financial protection.
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Agents may sell securities and other financial products with additional licensing
Insurance agents are salespeople who help individuals and companies obtain insurance policies for life, health, or property. They also offer other insurance products, including annuities. In addition to offering insurance, some insurance agents may sell securities and other financial products with additional licensing.
Some insurance products, like variable annuities, are considered securities under federal law. Agents who offer such products must be licensed as registered financial professionals and comply with the rules of the Financial Industry Regulatory Authority (FINRA). FINRA is the organization in charge of securities licensing and requirements and administers most of the exams that individuals need to pass to get licensed.
To sell securities, insurance agents must obtain a securities license. The type of license needed depends on the brokerage that's hiring or sponsoring the agent and the specific products they plan to sell. For example, the Series 7 license has the broadest reach, allowing holders to sell various securities. In contrast, the Series 6 license is for selling packaged investment products like mutual funds, variable annuities, and unit investment trusts (UITs).
To obtain a Series 7 license, individuals must pass the FINRA "top-off" exam, which qualifies them as general securities sales representatives. The Series 6 exam, also administered by FINRA, covers information on packaged investments, securities regulations, and ethics. This license is often required for insurance agents selling variable investment products.
In addition to the licenses mentioned above, there are other securities licenses administered by FINRA, such as the Series 3 and Series 31 licenses, which are for selling commodities and managed futures, respectively. The Securities Industry Essentials (SIE) Exam is another FINRA exam that individuals must pass before obtaining a license from a member firm.
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Insurance agents act as mediators between insurance companies and clients
Insurance agents are salespeople who help individuals and businesses obtain insurance policies. They act as mediators between insurance companies and clients, representing the insurance company in the transaction while helping customers find the right coverage. Agents explain the different insurance options and facilitate the completion of the transaction. They may work for a single company or multiple companies.
There are two main types of insurance agents: captive agents and independent agents. Captive agents work exclusively for one insurance company and can only sell the policies and products that company offers. Independent agents can represent multiple companies and typically try to find insurance policies that offer the best coverage for the client's circumstances. Independent agents may sell the policies of several companies to match their clients' needs with the company that offers the best rate and coverage.
Insurance agents are licensed by state insurance commissions, which impose sales and marketing rules and require companies to file financial reports to assess their ability to honour claims. Most states require agents to complete specific courses and pass exams covering insurance fundamentals and state insurance laws to obtain a license. Agents who sell securities and other financial products must also be licensed by the Financial Industry Regulatory Authority (FINRA).
Insurance agents have a fiduciary duty to both the insurance carrier and the insured. They are generally not liable for actions other than obtaining insurance coverage for their clients, unless a "special relationship" has been established. A special relationship may be established if an agent counsels the insured on policy terms or needed coverages, and the agent may then be held liable for failing to explain a coverage or exclusion. Agents also have a general duty to act reasonably, which has been defined by Texas courts as "the greatest possible duty". This duty includes keeping clients fully informed so that they can remain safely insured at all times.
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Frequently asked questions
No, insurance agents are not federal employees. They are licensed salespeople who can help individuals and companies obtain insurance policies and other insurance products.
Every state, along with the District of Columbia and U.S. territories, has an insurance commission that licenses insurance agents and insurance companies doing business in that jurisdiction. Most states have adopted uniform licensing laws, with reciprocity agreements allowing brokers from one state to become licensed in another state.
Requirements for licensure vary by state but typically include completing specified courses and passing state exams covering insurance fundamentals and state insurance laws. Most states also require agents to take continuing education courses to maintain their licenses.
