insurance

Broker (Insurance)

An independent insurance professional who represents clients rather than insurance companies, shopping for coverage among multiple insurers to find the best policies and prices. Unlike agents, brokers work for the consumer and are paid commissions by the insurance companies they place business with.

Example

“The small business owner hired an insurance broker to compare commercial policies from fifteen different companies, ultimately saving $3,000 annually while getting better coverage than their original policy.”

Memory Tip

Remember 'Broker = Your Poker' - a broker plays poker with insurance companies on your behalf, trying to get you the best hand (policy) possible.

Why It Matters

Insurance brokers can save consumers significant money and provide expertise in navigating complex insurance markets. They have access to multiple insurance companies and can provide objective advice since they don't work for any single insurer.

Common Misconception

Many people think brokers cost extra money, but brokers are typically paid by commission from insurance companies, not by clients. Some also believe brokers and agents are the same, but brokers represent clients while agents represent insurance companies.

In Practice

A manufacturing company pays $25,000 annually for commercial insurance through a captive agent. An insurance broker reviews their coverage, compares quotes from eight insurers, and finds equivalent coverage for $18,000 with better terms. The broker earns a $1,800 commission from the new insurer, the client saves $7,000 annually, and gets improved coverage - everyone wins except the original overpriced insurer.

Etymology

From Old French 'brocour' meaning 'small trader' or 'peddler,' later evolving to mean an intermediary who facilitates transactions between parties.

Common Misspellings

brockerbrokkerinsurance broakerinsurence broker

Related Terms

Independent Agent Captive Agent

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