The Best Comprehensive Guide for Independent Insurance Brokers

TLTR: This blog explains what independent insurance brokers are, their roles and responsibilities, and lists the five steps that you will need to follow to become one.

When individuals and small business owners decide on purchasing insurance policies, they do so through insurance agents or brokers.

While both insurance agents and brokers perform similar functions, there are specific key differences between the two. If you’re planning on starting your career as either an insurance agent or an insurance broker, you need to first understand the roles they serve.

Let’s start with what both professions have in common.

The primary job of both agents and brokers is to sell insurance to their clients. They both need to be licensed in the states they are operating in, and need to strictly comply with set rules and regulations. Both professions act as middlemen between insurance buyers and insurance providers. They both can also sell various policies, such as:

• General Liability Insurance

  Covers you and your business against claims involving physical injuries and property damage resulting from your products.

• Business Owners Policy

  Protects business owners against property damage, business interruption, and various perils.

• Errors and Omissions Insurance

  Helps protect individuals and businesses from lawsuits that claim that you made a mistake in the course of your professional service. This can help cover your legal costs or settlements.

• Commercial Property Insurance

  Helps protect commercial property from perils like theft, fire, and various natural disasters.

• Commercial Auto Insurance

  Provides physical damage and liability coverage for commercial vehicles that are not covered by personal auto insurance.

• Workers Compensation Insurance

  Helps employees who are injured in the course of employment by covering wage replacement and medical expenses.

So, where exactly does the difference lie?

What separates agents from brokers is who they represent. While insurance agents represent one or more insurance companies, insurance brokers represent only the insurance buyer during the insurance process. An insurance broker acts as an intermediary who sells, solicits, or negotiates insurance policies with the insurance providers on behalf of their clients.

Another critical difference between the two is that where agents (especially independent insurance agents) represent one or more insurance providers under a contract, insurance brokers can negotiate with multiple insurers until they find the most appropriate policy for their clients. Their primary loyalty is towards their clients.

So, before you move towards starting a career in the insurance industry it is crucial that you understand the differences between being an insurance agent vs broker.

What Is An Independent Insurance Broker?

Insurance brokers serve as an intermediary between their clients and the insurance carriers. Since insurance brokers aren’t tied to one or more insurance companies as insurance agents are, and since they represent their clients in the insurance process, all brokers are independent insurance brokers.

Knowing which insurance policy to purchase can be difficult. This is why clients hire independent insurance brokers to help them find some structure and clarity. Brokers work closely with their clients to analyze their needs and budget. They can help clients save a lot of valuable time and effort.

Whether or not the clients go with what their insurance broker suggests is entirely up to them. However, since brokers don’t make money until their clients make the purchase, they usually suggest the best options with no strings attached so as to keep the process short and efficient.

It is also important to understand that since an insurance broker doesn’t represent insurance companies, they cannot legally bind a policy themselves. They need to hand over the responsibility to an insurance agent or an insurance company to complete the process.

When it comes to cultivating the client base, you will be competing with both independent and captive agents.

Note: Successful insurance brokers often have a greater industry knowledge than captive and independent insurance agents.

Some of the top responsibilities of independent insurance brokers are:

• Researching policies
• Developing effective marketing strategies
• Providing clients with advice on risk management
• Preparing reports
• Managing business development and promotional activities
• Maintaining a proper database
• Keeping up with insurance-related regulatory and legislative updates
• Cultivating new clients

How To Become an Independent Insurance Broker in Five Steps

For insurance brokers to sell insurance to their clients, they need to first be well-versed in insurance knowledge and obtain their license in the insurance area they are specializing in. These licenses are issued and regulated by the state where they’re planning to operate.

Here are the five steps that you will need to follow in order to become an independent insurance broker:

Step 1: Get an Undergraduate Degree

Although a high-school degree is adequate to apply for an insurance license, having an undergraduate degree will significantly improve your chances of finding employment with an insurance brokerage firm.

Furthermore, independent insurance brokerage firms prefer graduates with specializations in subjects of business administration or economics. Being able to show that you have an academic background in finance, accounting, marketing, and business laws will give you significant exposure in the eyes of employers.

Having additional academic experience in subjects like psychology, communications, sociology, and public speaking can also give you an added boost.

Step 2: Apply for an Internship with an Insurance Firm

See if your university’s bachelor’s degree program in insurance or risk management offers internship opportunities with insurance firms. As an intern, you can directly observe and even participate in some of the internal operations of insurance brokerage firms. It can give you a preview of the type of work insurance agents and brokers carry out on a daily basis.

During the internship, you can also ask questions and learn from established insurance professionals and even get to work under them as an apprentice. Most people end up finding employment in the brokerage firms that they intern for.

If an internship isn’t a part of the program, you can try to arrange one yourself.

Step 3: Obtain an Insurance Broker License

You will need a license in order to talk with your clients and sell insurance policies. Each state has different licensing requirements and issues its own insurance broker licenses. If you’re planning on operating in more than one state, you will need to obtain multiple licenses from multiple states.

Furthermore, personal, property, and casualty insurance have their own specific licenses. Read up on your state’s department of insurance website to understand the requirements.

Getting a broker’s license is different from getting an agent’s license. However, as a broker, you can still get an agent’s license and work for insurance companies in that capacity.

Note: Some states are moving away from conducting two different license types and instead mandating both agents and brokers to obtain a producer’s license.

A recent news article from Insurance Journal mentioned how only licensed producers have the exclusive responsibility for determining coverage types and potential endorsement options in the state of Louisiana.

To obtain a license, you will need to sit for a state-regulated insurance broker exam. Depending on your specialty, you might need to take multiple exams. The test is offered by the Financial Industry Regulatory Authority. This exam is held at a testing site. You’ll probably take it on a computer. The date and time will be scheduled beforehand, and the test usually lasts for two to three hours.

As with any subject, the level of difficulty will depend on how prepared you are. You should have a relatively smooth experience if you’ve put in the hours studying and completed your pre-exam requirements.

Some states require you to submit your biometrics such as scans of your fingerprints, and may also conduct a background check.

Step 4: Submit Your Application and Get Hired

Once you’ve passed your exam, you can apply for a job at a brokerage firm. Be sure to submit your application right away to avoid missing any deadlines. Entry-level jobs consist of either a customer service position or an assistant to a broker. As you start gaining more experience and become more familiar with the inner workings of the firm and the industry, you can transition into:

• Customer service representative (handle insurance transactions)
• Personal lines representative (provide in-depth coverage for personal belongings and property)
• Commercial lines representative (handle preliminary commercial and business insurance)

However, if you show exceptional zeal, initiative, proactiveness, leadership, and competency, you could transition to higher positions like department supervisor, project leads, and even branch manager in a relatively short period of time.

Step 5: Obtain an Insurance Broker Certification

If you’re looking for a more structured professional development and career progression, choosing a specific insurance line that you’re interested in, and then obtaining a certification on it is the way to go. The National Alliance for Insurance Education and Research offers various certification types for both insurance agents and independent insurance brokers.

Some of these certifications include:

• Certified Insurance Counselor (CIC)
• Certified Insurance Service Representatives (CISR)
• A Certified Risk Manager (CRM)

If you’re interested in the health insurance sector, you can work toward a Health Insurance Association (HIA) certificate that is offered by America’s Health Insurance Plans (AHIP).

Similarly, if your interests lie in financial planning, you can get the Certified Financial Planner (CFP) certificate that is offered by the Certified Financial Planner Board of Standards.

Note: To obtain a CFP certificate, you will need a minimum of three years of experience in financial planning. You will also need to sit for an exam that covers several related subject areas like general planning principal, tax and retirement planning, and risk management.

In Conclusion

Independent insurance brokers play an integral role in ensuring that their clients receive the right insurance policy that meets all their needs. But in order to become an insurance broker, you will need to follow a structured set of steps. While the specifics of these steps differ according to state laws, common elements include getting an undergraduate degree, applying for an internship program, earning a license, applying for a job, and obtaining an insurance broker certification.

So, let us help you become the insurance broker we know you’re capable of becoming. Sign up for our membership plan today!

Did you find this blog helpful? Let us know in the description below.