insurance agency and companies

Who am I actually buying insurance from?

When you purchase insurance for your small business there are two parties involved; an insurance agent and an insurance company.

The insurance company is actually the party that you are buying the policy from. That is who you are paying for the coverage and who will be responsible for handling and making any required payments for claims that your business has. These are typically large national or even international companies that have the significant financial resources required to guarantee coverage for the policies.

Then what does an insurance agent do?

An insurance agent works on behalf of their small business customer to shop and purchase insurance coverage for them. They are working directly with the different insurance companies to make sure they have the required information to properly price coverage and when a business is ready to purchase coverage the agent will work with the insurance company to finalize the policy and make sure a certificate of insurance is issued.

Why can’t I buy straight from an insurance company?

Insurance companies have relied on the agent model for more than a hundred years in order to reach small businesses. They have made the decision that, as opposed to building their own sales team, they will partner with licensed agents to sell their product. This process involves a formal relationship between the agent and company, which culminates in an agent receiving an appointment from the insurance company. This appointment gives them the right to sell policies for the insurance company.

How are agents different from each other?

There are a few big differences:

Number of Appointments - Agents have the opportunity to receive appointments from multiple insurance companies, but the actual number of appointments will vary greatly between agents. Given that there are hundreds of insurance companies no agent will represent all of them, but if you want to be able compare options from one agent you need to make sure they have appointments from multiple carriers.

Captive Agents - Some insurance companies have made the decision to work with agents who will only sell their coverage. These agents that are only allowed to have a single appointment are often called a captive agent. For some insurance companies you will have to work with one of their captive agents to obtain a quote, in these scenarios you will have to work with multiple agents in order to be able to compare prices.

Communication - Historically the relationship between an agent and small business had been handled via in-person meetings. For the most part agents still communicate with their customers via traditional communication channels such as in-person and phone calls. Talage is one of the first digital agencies, we offer small businesses the option to handle of their insurance needs online.

Can a better agent get a better deal than my agent?

All agents that have an appointment from an insurance company will offer the same price for that company’s coverage. The only way that pricing will differ between agents is if they have appointments from different insurance companies.

How do agents get paid?

Agents are paid by the insurance companies after they sell a policy for them. A small business should never be charged directly by an insurance agent. It is also important to note that an agent is paid a % of the overall premium by the insurance company. This is key because it means that the higher the premium a business pays the more an agent makes. Agents that do not have the business’ best interest at heart may have motivation to market a higher priced policy.

What does all this mean for my small business?

The important thing to know is that an insurance agent is working for both you and the insurance company. No matter what agent you are working with it is encouraged to ask for the price quotes for all policies they can obtain. The best way to make sure you are getting the best price and are working with the right agent is to know all of options they can offer. Remember there is no cost to work with an agent up to the point of purchasing coverage, so if you aren’t comfortable with what they present you have the right to walk away.