Broker Agreement with Insurance Company

Broker Agreement with Insurance Company: Understanding the Basics

Brokers play a crucial role in the insurance industry. They act as intermediaries between clients and insurance companies, helping clients understand their coverage options and finding the right policies to suit their needs. To become a broker, you must have the necessary qualifications and certifications and enter into a broker agreement with an insurance company.

In this article, we will take a closer look at what a broker agreement is, and what you need to know about it.

What is a Broker Agreement?

A broker agreement is a legal contract between a broker and an insurance company. The agreement outlines the terms and conditions of the partnership between the two parties. The contract includes details on the types of policies the broker is authorized to sell, the commission or fees the broker will receive, and the responsibilities of the broker and the insurance company.

Types of Broker Agreements

There are two types of broker agreements: direct appointment and sub-broker appointment.

Direct appointment is when the broker is appointed by the insurance company to sell its policies directly to clients. The broker has a direct relationship with the insurance company and is authorized to sell its policies to clients.

A sub-broker appointment is when the broker is appointed by another broker who has a direct appointment with the insurance company. The sub-broker is authorized to sell the policies of the primary broker, who is in turn authorized to sell the policies of the insurance company.

Responsibilities of the Broker

As a broker, you have certain responsibilities to both your clients and the insurance company. Your primary responsibility is to act in the best interest of your clients and help them find the right policies to suit their needs. You must also adhere to ethical and legal standards in the industry.

In your agreement with the insurance company, you will also have specific responsibilities. For example, you may be responsible for submitting applications for coverage, processing claims, and providing the insurance company with accurate and timely information.

Commission and Fees

As a broker, you earn commissions or fees for the policies you sell. The commission or fee structure will be outlined in your broker agreement. Depending on the type of policies you sell, your commission or fees may be a percentage of the premium paid by the client or a flat fee per policy sold.

It is important to note that commission amounts are regulated by state insurance departments. The insurance company cannot pay you a commission that exceeds the amount allowed by state law.

Conclusion

A broker agreement is a crucial element of the partnership between a broker and an insurance company. It outlines the responsibilities of both parties, the types of policies the broker is authorized to sell, and the commission or fees the broker will receive. Understanding the basics of a broker agreement is essential for anyone looking to become a broker in the insurance industry.