Everyone, at some point in their life, will probably need insurance. They may purchase insurance directly. They may purchase it from an agent. Or, depending on their needs, they may choose to purchase it through an insurance broker.
But what is an insurance broker? If you’ve gotten to this page, you might be in the initial stages of purchasing insurance and are wondering why many customers choose to go the broker route. Or, you’re looking for a change of career path. Whatever the case, we’re happy to fill you in on what an insurance broker is, what their role is, how the began, and more! Let’s begin.
An Overview of “Insurance Brokers”
In essence, an insurance broker is an intermediary who sells, but also negotiates insurance on behalf of a client (a prospect policyholder) for compensation. Note that an insurance broker and an insurance agent are not the same thing; a broker represents multiple companies where an insurance agent represents only the one.
In Canada, insurance brokers are regulated on a provincial basis, and both agents and brokers are licensed and regulated by a specific organization – in Quebec, that’s the Autorité des marchés financiers (AMF). In provinces like Ontario, insurance brokers typically have self-governing bodies. These bodies are responsible for regulation and licensing.
We’ll get into their role a little bit later in this 101. Next, let’s look at the history of the insurance broker.
A (Brief) History of the Insurance Broker
Insurance, believe it or not, has existed for thousands of years – and pretty much as long as we’ve had any semblance of a monetary society. Protecting finances and securing investments has been something we’ve done for centuries, and the earliest known insurance policies appeared around 1750 BC. These policies were used to help merchants who would sail products across the Mediterranean and would secure them in the promise that if their cargo was lost at sea, the debt that they owed to lenders would be cancelled. They would pay a fee for this “agreement” – which, today, would be called a premium!
Insurance in North America was predominantly “fire insurance,” to protect against residential and property fire. One of Canada’s major historical figures was renowned as a father in the insurance industry: Sir John A. MacDonald, the first Prime Minister.
Auto insurance also started to come about in the late 1800s. In 1896, in London, Bridget Driscoll was killed by a gas-powered car. Auto insurance emerged shortly after as a liability only policy, but then began to include comprehensive coverage with fire and theft protection.
Insurance would become more competitive due to the inclusion of compulsory insurance and would need someone to sell it. Insurance started to have underwriters sell their insurance, but demands would begin to increase, and risks would become more complex. Underwriters, who were already hard at work assessing risk, wouldn’t have the time to sell and write.
Brokers who represented buyers, not companies, began to enter the business. Johnson & Higgins was the first, founded in New York City in 1845. Both agents and brokers would expand in terms of professionalism, and many would form trade associations to advance their interests. Nowadays, brokers are integral in the process of selling and distributing insurance!
The Role of an Insurance Broker
An insurance broker is a seller on behalf of the client. They not only sell insurance policies, but they also negotiate to find better deals and work continuously to advise the client on the best next steps. They assess the client’s unique insurance needs and work to connect them with any one of the insurance partners they have network connections with, to find them the best fit.
A good broker will also help advise the client come renewal time, suggest alternatives, and help you shop around. They get to know the client, as the client is their biggest interest. If the client needs to make a claim, generally the broker may also serve as a point of contact for the client to use when they need advice or additional support.
How are insurance brokers paid?
Brokers are paid on commission, which is paid by the insurance provider that the broker connected you with. This is typically represented as a percentage of the insurance policy. This means that the client isn’t charged any extra for using an insurance broker.
What is an insurance agent?
An insurance agent, by contrast, is a seller of insurance but they work on behalf of the company – not on behalf of the client. They are similarly licensed and insured as brokers but offer only the products of the insurance company and are limited to what that company sells.
Insurance agents don’t have to do any comparison shopping between insurers, so there is an advantage in choosing them: the process is much quicker. Still, when you need competitive rates and customized coverage, the better option is the broker.
LMBF: Quebec’s “Blue” Insurance Broker
With over 50 years of history in the insurance industry, LMBF is a Quebec based insurance brokerage dedicating to great customer service. We have grown in a rapid few years to become on of the top insurance brokers in Quebec. From our inception, our success in the industry has been accredited to selecting team members with a strong dedication to service, boldness, and a sense of integrity.
Are you covered in blue? Get a free quote with us today and see the LMBF difference.
