Jeffrey Wade
An entity that provides insurance can be called an insurer, insurance company, insurance carrier, or underwriter. An insurance underwriter decides who or what the insurance company should insure and how much they should charge. A person who buys insurance is called a policyholder, and a person covered under the policy is called the insured. An insurance agent represents one or more insurance companies and sells their policies for a commission, while a broker represents consumers in their search for coverage.
| Characteristics | Values |
|---|---|
| Person who sells insurance | Insurance agent, broker, or carrier |
| Person who buys insurance | Policyholder |
| Person covered under the policy | Insured |
| Person who decides which people and things an insurance company should insure | Underwriter |
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What You'll Learn
Insurer, insurance company, insurance carrier, or underwriter
There are several terms related to the concept of insurance and the people involved in the process. Here is a detailed description of each of these terms:
Insurer
An insurer is a person or entity that provides insurance to another party. In simple terms, it is the party that offers insurance policies and agrees to compensate the insured in the event of a specified loss, damage, or injury. Insurers can include insurance companies, insurance carriers, or, in some cases, independent insurance agents or brokers. The term "insurer" is often used interchangeably with "insurance provider" or "insurance company."
Insurance Company
An insurance company is a business organisation that provides insurance services to its customers. These companies employ various professionals, such as agents, brokers, underwriters, and actuaries, to assess risks, develop insurance products, and sell insurance policies to individuals or businesses. Insurance companies can offer a wide range of insurance products, including health insurance, life insurance, property insurance, and liability insurance, among others.
Insurance Carrier
An insurance carrier is another term used for an insurance company or insurer. It is a company that sells insurance policies to individuals or businesses. The term "carrier" emphasises the role of the entity in bearing or carrying the risk on behalf of the insured. Insurance carriers assess the risks associated with insuring a person or property and set the terms and conditions of the insurance policies they offer.
Underwriter
An underwriter is a crucial role in the insurance industry. An underwriter is responsible for evaluating and assuming the risks associated with insuring a person, property, or business. They decide whether to provide insurance coverage and determine the terms and conditions of the policy. Underwriters assess the risks based on various factors, such as health, age, location, and value of the asset being insured. They also play a vital role in reinsurance, where they assess the risks taken on by other insurance companies and decide whether to provide them with additional coverage.
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Insurance agents and brokers
Insurance agents represent and sell policies from a single provider or a small number of insurance providers. They help choose and enrol clients in a binding policy, acting as a one-stop shop. Agents work for insurance companies and can help with multiple types of insurance, including auto insurance, health insurance, and more.
Insurance brokers, on the other hand, represent the consumers and can help them shop for policies from multiple providers. Brokers do not work for any specific insurance company, allowing them to recommend and sell policies from several different insurance companies. They are skilled at comparing policies across providers and helping clients decide on the appropriate coverage within their budget. Brokers typically work on commission or earn fees from insurance providers, and their earnings come out of the client's premiums.
Both agents and brokers can help individuals and businesses obtain various types of insurance. However, the key difference lies in whom they represent and the number of providers they work with. While agents represent insurance companies, brokers represent the clients purchasing the insurance policies.
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Captive and independent agents
There are two types of insurance agents: captive agents and independent agents.
Captive Agents
Captive insurance agents work for and represent a single insurance company and sell only that company's policies. They are typically under contract with an insurance carrier and receive a regular salary, commission, and benefits. Captive agents benefit from the insurance company's broader marketing strategy and the support that comes with it, such as being set up with an office or workspace and access to administrative staff. They also enjoy high brand recognition due to the company's extensive advertising. Captive agents have a more stable and consistent income due to the stability provided by working directly for an insurance company. However, they have limited product offerings and may have lower commission rates compared to independent agents.
Independent Agents
Independent insurance agents, on the other hand, work with multiple insurance companies and sell policies from various carriers. They have greater access to different insurance products, allowing them to offer their clients a wider selection of coverage options. Independent agents typically earn a higher percentage of their sales, sometimes receiving commissions up to 50% higher than captive agents. However, they are responsible for paying their overhead costs and managing the complexity of working with multiple carriers, including navigating different forms, procedures, and regulations. Independent agents do not have access to the same level of support and referrals provided by insurance companies to their exclusive agents.
While captive agents benefit from the stability and support of a single company, independent agents have the advantage of offering a broader range of products and potentially earning higher commissions. The choice between becoming a captive or independent agent depends on various factors, including income potential, access to products, and the level of support desired.
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Retail broker
In the insurance industry, a person who sells insurance is called a "carrier" or "insurer".
Now, here is some detailed information about retail brokers:
A retail broker is a financial professional who acts as an intermediary between buyers and securities sellers. They are typically licensed to sell securities and are often referred to as stockbrokers or registered representatives. Retail brokers work with individual investors to facilitate equity and debt trades, including stocks and bonds. They may also sell additional financial products such as mutual funds, limited partnerships, options, and real estate investment trusts.
To become a retail broker, one must obtain the necessary licenses, which include passing state and federally-mandated securities examinations. These examinations are administered by the Financial Industry Regulatory Authority and include the six-hour Series 7 exam and the Series 63 Uniform State Laws Exam. Retail brokers may also choose to pursue additional certifications, such as becoming a Chartered Financial Analyst.
In some states, retail brokers may receive both commissions and broker fees from their clients. Their primary role is to generate commissions for their firm by acquiring new customers and selling securities. However, they may also advise clients on various financial matters, such as individual retirement accounts, tax-advantaged products, education planning, and asset management.
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Customer service representatives
A customer service representative (CSR) in the insurance industry works with existing and potential clients on the phone, via email, and in the office. They are responsible for educating customers about coverage options, quoting policies, and selling additional products. CSRs also address customer inquiries regarding their insurance coverage, including policy changes, certificates of insurance, and answering any questions customers may have.
Excellent interpersonal skills are required to build rapport and provide exceptional customer service. This role may also involve upselling products and services to customers when appropriate.
Some companies prefer candidates with prior experience in customer service, preferably in a healthcare, hospitality, call center, or client service environment. Other companies provide paid training to prepare candidates for different call types and customers.
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Frequently asked questions
A person who works in insurance could be called an insurance agent, broker, underwriter, or customer service representative.
An insurance agent represents one or more insurance companies and sells their policies for a commission. They can work full-time for an insurance company or as an independent contractor.
An insurance broker represents clients in their search for insurance coverage. Unlike agents, brokers do not represent specific insurance companies and instead find their clients the best policies from several different companies.
An underwriter decides which people and things an insurance company should insure and which ones they should not. They also determine how much the company should charge for insurance.
A customer service representative talks with people to answer questions about what their insurance does and does not cover, especially after their property has been damaged.
