An insurance broker is the person who is licensed to analyze individuals and businesses in order to sell insurance coverage to them depending on the results of the analysis. Brokers have wider knowledge and experience relevant for underwriting insurance than agents. They also have higher education requirements than agents. The insurance broker does not have a contract with the insurance company and therefore has no legal obligation to them but are independent in their work. They have to obtain a brokerage license from the state they sell insurance although in most instances they can also sell insurance in other states.
Certain insurance companies do not deal with clients directly and only underwrite insurance through authorized brokers or brokerage firms. The brokers discuss the insurance needs with clients and advise them which coverage will be appropriate for them whether as separate policies or combined. Different clients are prone to different risks. The broker will inform the client which types of policies are available for different risks. They advise them about the relevant types of insurance in each case. When they agree on what is to be covered they enter an agreement. The policy will state which risks of loss are covered and exclusions of what will not be covered. To be fully covered the client can buy a policy which is adjusted with extra endorsements or they can buy additional policies to cover the exclusions.
The brokers assist clients to buy different policies from several insurers and this is very convenient for policyholders because they will be dealing with only one broker instead of several insurers. The various insurers have their own policies and the broker will know which policies to source from which insurer. When submitting claims, the claimants will submit all claims to the broker who will lodge and follow the claims on behalf of clients from the different insurers. They are paid fees or commissions which is a percentage of premiums paid.
There are different brokerage licenses which can be applied for and some are available online. Each state has their own licensing requirements which meet certain minimum standards for that state. Licenses for property and casualty insurance are the most common. There are health and life insurance licenses although most health care programs are offered by federal and state governments.
The broker will analyze the individual needs or the business risks thoroughly and then complete detailed forms of the risks the client is asking to be covered. The insurance company will read the forms and the risks before committing themselves. They will assess the risk and if they undertake to cover it they will underwrite the risk coverage and a contract is signed in form of a policy. There are compliance requirements of how the policy will be underwritten and this has to be adhered to at all times. The brokers deal with different insurers and when buying insurance for their clients they may buy separate covers or buy a package for a combination of policies.