Insurance agents and brokers earn commissions on the premiums you pay for insurance. Because you are paying for their expertise, it's important to know what services agents should provide.
What Are Insurance Agents and Brokers?
Insurance agents and brokers serve as intermediaries between your business and insurance companies. They are licensed by state insurance departments. While licensing requirements vary, an agent or broker typically needs a property/casualty license to sell business insurance.
While agents and brokers perform similar functions, they have somewhat different obligations. Insurance agents have duties to both their clients and the insurance companies they represent. Contracts between agencies and insurers allow agents to bind certain types of policies. Brokers act on behalf of insurance buyers. Because they don't represent insurers, brokers lack the authority to bind policies.
Insurance Agent Responsibilities
Agents and brokers have legal obligations to the clients they serve. For instance, they must behave ethically, act in good faith, and follow clients' instructions. This means they must make a reasonable effort to secure the coverages you request. Your agent must notify you if the coverages you've requested aren't available. Your agent or broker also has a duty to place your coverage with a solvent insurer.
Agents and brokers have a duty to help you obtain the types of insurance your company needs. However, you (not your agent) are responsible for ensuring your business has adequate insurance. Agents aren't risk managers and can't guarantee your business has all the coverages it needs.
Why You Need an Insurance Agent
There are several reasons why you need an insurance intermediary. First, many insurers rely on agents and brokers to distribute their products. They don't sell policies directly to businesses. Secondly, agents and brokers know the insurance marketplace much better than the average business owner. They monitor market conditions and keep abreast of insurers underwriting standards. Agents know what coverages are available and how much they generally cost. They also know which insurers will insure your business at a reasonable price.
Services An Insurance Agent Provides
Insurance agencies and brokerages vary in size and complexity. Some have a single location with only a few employees. Others are large multinational organizations. Whether you choose a small agency or a large brokerage, your insurance intermediary should provide the types of services outlined below.
Knows Your Business
First, your agent should have a thorough understanding of your business. Your agent needs to know what your company does, where it operates, how many workers it employs, and other essential details. Your agent is not a mind reader. You know more about your business than anyone else and you need to be forthcoming with information.
Be sure to tell your agent if your business has any unique risks, such as a sideline operation or an affiliation with another business.
Helps Assess Your Coverage Needs
Once your agent has a basic understanding of your company's business, he or she should help you decide what coverages you need. Some types of insurance, such as auto liability and workers compensation, are compulsory. Others are not mandated by law but are crucial nonetheless. An example is general liability insurance. Some types of insurance (like auto physical damage coverage) are valuable but not always essential. To make the most of your insurance budget, you can ask your agent to help you rank the coverages by importance.
Shops for Coverage
Once you've decided on coverages, your agent should submit an application to one or more insurance companies. If you are using an independent agent, he or she should be familiar with the products offered by the insurers the agency represents. Your agent should also know which of these products will best suit your needs. While it's preferable to obtain quotes from several insurers, this may not be possible if your business is risky, has unusual characteristics, or a poor loss history. In that event, your agent may ask a surplus lines broker to obtain quotes from one or more non-admitted insurers. one or more insurance companies.
Helps You Select the Best Option
Once insurers have provided quotes, your agent should help you understand them. It is your agent's responsibility to ensure that the quoted premiums include the coverages you requested. If the premium is more than your business can afford or the coverages or limits don't meet your needs, your agent should try to negotiate a better deal. Once the quotes have been finalized, your agent should answer any questions you have about the policies you are purchasing.
Maintains Your Coverage
Your agent's job doesn't end once you've obtained a policy. Your business is likely to grow and change over time, and your insurance needs to adapt to those changes. Your agent or broker should contact you several months before your policy expires to obtain information your insurer will need to process your renewal. Such information may include current sales and payroll projections, and an updated list of vehicles. Be sure to tell your agent about any changes you have made or plan to make to your business such as moving to a new location or acquiring new equipment.
Helps With Claims
If your company sustains a loss, your agent should provide guidance in completing claim forms and submitting them to the insurer. The agent should monitor the claim to ensure it is processed promptly. If your claim payment is delayed or denied, perhaps due to missing or inaccurate information, your agent can talk to the adjuster on your behalf to speed up the payment process. Once your claim has been paid, your agent can help you determine whether the payment amount is fair and reasonable.
Resources for Small Businesses
Here are some resources that can help small business owners find an agent or broker.
- State Insurance Departments. Many state insurance department websites offer tips on how to find an agent or broker and how to ensure that person is licensed.
- Agent and Broker Trade Associations. Insurance agent trade associations can help small businesses find the right insurance agent or broker. Examples are the Independent Agents and Brokers of California and Insurance Agents & Brokers, which is active in Pennsylvania, Maryland, and Delaware.
- Trusted Choice. An organization that supports independent agents, Trusted Choice can help you find an agent who's familiar with your type of business.