How to Find the Right Agent or Broker
While some insurance companies sell policies directly to buyers, most distribute their products through agents and brokers. Thus, if you are a small business owner and want to buy a policy, you will likely need the services of an agent or broker. This article will provide some tips on how to find an agent or broker who is right for your firm.
Types of Agents and Brokers
One decision you'll need to make is whether to use an agent or broker. Insurance agents and brokers perform many of the same functions and have similar duties. Both are obligated to obtain insurance coverage on your behalf that is appropriate for your business and reasonable in price. Both must ensure that the policy you receive includes the coverages you requested, and explain any discrepancies. Yet, there are some differences between the two.
Insurance agents are representatives of insurance companies. Agents sign contracts, called binding agreements, with insurers. The contracts allow agents to sell certain types of policies. They typically afford agents some binding authority, meaning the authority to initiate coverage. For each policy they sell, agents receive a commission. Agents may be captive or independent. A captive agent represents one insurer only, while an independent agent represents several insurers.
Brokers act as representatives of insurance buyers. They do not sign binding agreements with insurers, so they do not have the authority to bind policies. When a broker wishes to initiate coverage on a customer's behalf, he or she must ask the insurer to issue an insurance binder. Like agents, brokers are paid a commission for each policy they sell.
Finding the Right Intermediary
Finding the right agent or broker for your business involves several steps:
- Obtaining referrals
- Doing a background check
- Interviewing candidates
- Selecting the best candidate
The best way to find an agent or broker is through a referral from a satisfied customer. Here are some sources to consider:
- Colleagues and business associates
- Friends, neighbors, acquaintances
- Trade or professional organizations
- Insurance company websites
Conducting a Background Check
Once you have identified a possible candidate, you'll need to vet him or her for suitability. Your first task is to make sure the agent has a valid license.
Many state insurance department websites contain a lookup tool that allows you to check the status of an agent's license. Make sure the agent's license is active. You should also ensure that he or she is licensed to sell the type of insurance you want to buy. For example, an agent will need a casualty (or a property and casualty) license in order to sell you a commercial auto policy. The agent will be unable to sell you an auto policy if he or she is licensed to sell life insurance only.
Your state insurance department website may also provide information about any complaints or enforcement actions that have been filed against the agent. The website should explain the outcome of any incidents listed.
Once you've confirmed that the agent is properly licensed, you can conduct a basic Internet search. Most insurance agencies maintain a website. Some sites include biographies of company principals and employees. Other sources of information include social media sites and websites of trade organizations, such as the Professional Association of Insurance Agents.
Interview Your Candidate
Now that you've completed the license and background check, you should interview the agent in person. Here are some questions to ask.
- Are you familiar with my industry? The agent should have at least a basic knowledge of your industry and the risks associated with it.
- What types of insurance do you sell? The agent should be familiar with the types of coverages your business needs. An agent who handles mostly personal lines coverages is probably not the right choice for a business. If your company needs specialized coverage, such as political risk insurance, be sure the agent will be able to provide it.
- How long have you worked as an agent? Experience is important, so choose an agent who has been in the business for several years.
- What credentials have you received? Many agents have attained credentials that are specific to the insurance industry. Examples are Chartered Property and Casualty Underwriter (CPCU), and Certified Insurance Counselor (CIC). If the agent's business card lists a designation that is unfamiliar to you, ask the agent to explain what it means.
- What insurers do you represent? Find out what insurance companies the agent represents and check those insurers' financial ratings.
- Can you provide references? Ask the agent to provide the names and contact information for satisfied customers with businesses similar to yours. Call the individuals and ask for their feedback.
- Can you meet my needs? Explain to the agent what types of services you are looking for and ask whether he or she can provide them. Some business owners want lots of face-to-face interaction. Others prefer to communicate via email or telephone.
Choosing an Agent
You may have to repeat the vetting process a few times until you find an agent you want to work with. Remember that a good working relationship takes time to develop. Communication is key. If you aren't happy with the service your agent is providing, speak up. Be clear about what you want. If the agent fails to respond to your requests, and you are still unhappy, find another agent.