Insurance agents are authorized representatives of one or more insurance companies who are licensed by a state insurance office to sell car insurance policies in that state. Agents may be independent or captive.
An independent agent represents more than one insurance company. Independent agents are also known as insurance brokers. An independent agent is usually paid a commission by the insurance company for each policy sold. Typically this is equivalent to 10% to 15% of the policy premium. This is why consumers do not need to pay insurance agents directly for their services (although independent agents can perform other services for which they may charge a fee).
A captive agent only represents one company and therefore only sells that company’s products. Captive agents are also known as exclusive agents. A captive agent may be paid either a salary or a commission, or a combination of the two.
State laws and regulations ensure fair competition between agents and allow smaller brokerages to compete with larger firms. Brokerage firms are prohibited from providing customers with rebates or other discounts on the standard policy prices charged by insurers.
The Agent of Record is an individual or legal entity authorized to represent a policyholder in purchasing, servicing and maintaining insurance coverage with a particular company. To protect the privacy of policyholders, most insurance companies will not disclose any information about a policyholder’s account with any agent other than the Agent of Record.
All states require insurance agents to be licensed before they can operate in the state. In addition, selling life and health insurance requires a separate license from selling property and casualty insurance. In most states, in order to become licensed, the applicant must complete educational courses and pass state examinations.
In addition to being licensed, an agent may earn one or more professional designations by completing the requisite training and passing exams. Some of these designations are:
The CPCU and AAI programs are administered by the American Institute for Chartered Property and Casualty Underwriters. The CIC program is administered by The National Alliance for Insurance Education & Research and the CLU program is offered by The American College.
Agents with these designations tend to be well-regarded in the industry, particularly those with the CPCU which requires applicants to undertake extensive study and pass national exams.
There are several organizations that represent the interests of agents. The Chartered Property Casualty Underwriters (CPCU) Society represents and assists credentialed property and casualty insurance professionals and promotes excellence through ethical behavior and continuing education. The Independent Insurance Agents & Brokers of America (IIABA) is a national alliance of 300,000 business owners and employees who offer all types of insurance and financial services products. The National Association of Professional Insurance Agents (PIA) represents independent agents in all 50 states, the District of Columbia and Puerto Rico.