You, like many small business owners, may be unfamiliar with insurance coverages and their costs. As a result, you may require the assistance of an agent or broker to help you obtain the insurance you require at a reasonable cost. When you want to buy policies from an insurance business that doesn’t sell its goods directly to customers, you may need the help of an agent or broker.
Small company insurance may be sold by an agent or an independent insurance broker, so how do you pick the correct one? This article will walk you through some of the measures you may take to identify the ideal insurance professional for your company.
Broker vs. Insurance Agent
You must determine whether to utilize an agent or a broker before selecting an insurance middleman. Insurance agents and brokers perform many of the same tasks and have many of the same responsibilities. For example, both parties owe it to you to behave in good faith and obtain the coverages you’ve asked for. They must advise you if they are unable to get the quantity or type of insurance you have requested.
While there are many similarities between agents and brokers, there are also differences.
Agents for insurance businesses are known as insurance agents. An independent agent represents numerous insurers, whereas a captive agent represents only one. An agency agreement spells forth an agent’s responsibilities to the insurer he or she represents.
The contract spells forth the agent’s contractual authority, which includes the ability to commence coverage. Some types of policies may be bound by the agent, while others may not. The insurer pays a commission to its agents for each insurance they sell.
Brokers operate as agents for insurance purchasers. They do not have the authority to bind policies because they do not execute binding agreements with insurers. When a broker wants to start coverage on a client’s behalf, he or she must request an insurance binder from the insurer. Brokers, like agents, are compensated for each insurance they sell.
An insurance agent or broker can provide most small businesses with the coverages and service levels they require. An insurance broker may be better suited to businesses with specific risks or complex insurance requirements.
Choosing the Most Appropriate Intermediary
The first step in finding the ideal agent or broker for your company is to get referrals from coworkers, business associates, friends, or acquaintances. You can also get referrals from trade or professional groups, or even insurance company websites.
Examine Your Prospects
After you’ve narrowed down your list of probable candidates, double-check that they’re fully licensed. You can find out about your license by calling your local insurance department.
Inquire about the agents’ active licenses and whether they’re licensed to sell the type of insurance you’re looking for. If you want to buy a company owner’s insurance, for example, your agent should be licensed in property (or property and casualty).
They also may be able to tell you if the agents have been the subject of enforcement actions or even complaints. If the department is unable to offer this information, you can check with The Insurance Supervision Directorate.
Any agent or broker that is extremely pushy, offers unrealistic promises, or tries to rush your choice should be avoided.
Check out our IP checklist as well.
Vet Prospective Agents or Brokers
You should interview prospective brokers now that you’ve performed the license and background check. The interview might be conducted in person or over the phone. Here are a few questions to think about.
- Do you know what my line of work entails? The agent should have a fundamental understanding of your sector and type of company.
- What kind of insurance do you provide? The agent should be able to provide the coverages that your company requires. An agent who primarily handles personal lines coverages is unlikely to be the best fit for a business.
- How long have you been a real estate agent? Choosing an agent with a lot of experience is crucial, so look for someone who has been in the company for a long time.
- What kind of credentials have you been given? Many insurance professionals have earned certifications such as the Chartered Property and Casualty Underwriter (CPCU) or the Certified Insurance Counselor (CIC) (CIC). If you’re not sure what the credentials mean, contact the agent for clarification.
- Which insurance companies do you represent? Find out which insurance companies the agent is affiliated with (or the broker deals with). Examine the financial ratings of the insurers.
- Are you able to provide references? Request the names and contact information of satisfied customers from businesses similar to yours from the agent. Request feedback from the individuals by calling them.
- Are you able to accommodate my requirements? Explain what services you require to see whether they are able to provide them. Some entrepreneurs desire a high level of face-to-face connection. Others would rather interact through email, phone calls, or text messages.
Making a Decision
You should be ready to make a decision once you’ve vetted and interviewed your candidates. Keep in mind that establishing a successful working relationship takes time. Communication is critical. Speak up if you’re unhappy with the service your agent is giving. Make sure you know exactly what you want. If the agent does not reply to your requests and you remain dissatisfied, look for another agent.
See our lists of questions to ask before starting a business as well.