Highlights
  • There’s a difference between a health insurance agent and a health insurance broker.
  • With health insurance, you may want a professional to guide you as your needs change.
  • The new national health care law makes agents and brokers uneasy, maybe prematurely.

A health insurance agent or broker can save you time and money, whether you’re an individual seeking coverage or a business owner shopping for the best medical plan for your employees.

Licensed health insurance agents and brokers, known in the trade as “producers,” are like insurance Sherpas to help navigate the complex hills and trails of America’s health care system. “Captive” agents work for one insurance carrier alone and are typically employees of that company. Independent agents, also known as brokers, work with several carriers who pay them either a percentage or flat fee on plans they sell to their clients.

Agent vs. broker

Which is right for you? It depends. An agent representing a carrier directly may be able to offer you a lower rate, easier plan changes and a closer relationship with the insurer. A broker, on the other hand, may be able to find you a better fit by combing the market.

If it seems like a tossup, your best move may be to research agents and brokers online and even meet a few before choosing your approach. And, understand that there’s little advantage to working with multiple agents because a broker can approximate the same results.

Agents and brokers make their money through commissions paid by the insurance company for making the initial sale. As incentive to keep you a happy camper, they can receive additional compensation when you renew.

What’s the risk in forging ahead into the insurance market without an agent or broker?

“You may choose not only the wrong product, but you may not be with the carrier that is going to help you the most,” says Scott Leavitt, senior vice president of sales for San Francisco-based Self Health Network. “With health insurance, there are a lot of moving parts and you’re buying something for a long period of time.”

The difference with health insurance

Unlike purchasing auto, home or life insurance, buying a health policy is just the beginning, not the end of the process. Why? Your health and that of your family can change constantly — and so can your insurance needs.

“About 80 percent of what an agent does comes after the point of sale,” says Leavitt, who also is past president of the National Association of Health Underwriters, or NAHU.

He says look at life insurance by comparison. “You only have one claim: You die, they pay and you’re done,” Leavitt says. “In health insurance, an agent remains your advocate.”

Since most of us receive our health insurance through our employer, we see very little of the ongoing services that agents provide. To give a few examples, NAHU says agents:

  • Assist clients with claim issues, including writing letters to doctors and hospitals and compiling documentation to help resolve claims.
  • Negotiate renewable rates for employers.
  • Explain plan designs, benefits and options to employees.
  • Resolve billing issues.
  • Help COBRA-eligible beneficiaries with coverage following the loss of a job.

Some of those services may soon be changing in the face of health care reform, however.

 

Read more: http://www.bankrate.com/finance/insurance/health-insurance-sherpa-agent-or-broker-1.aspx#ixzz46OnhR5R4


How to Hire a Health-Insurance Broker or Agent

Insurance agents and brokers can help a business owner sort through the array of health insurance plans available to find one that fits the needs and budget of a company. While some people research their options on their own, many others find the process daunting and can benefit from some professional assistance. Deciding who will help you choose an insurance plan is an important first step.

Here’s a rundown of points to consider before hiring an insurance professional, including the differences between brokers and agents.

Choose a professional with a good reputation in the industry, so ask for referrals from companies similar to yours in size and scope. Check references, as well as licenses and registrations. You can check a broker or agent’s disciplinary record by calling your state insurance commissioner’s consumer hotline. Ask if they’ve ever been sued by a client. While there is no central clearinghouse for this kind of information, you can take the extra step of doing a Web search on their names to see if anything turns up.

Services vary from one insurance professional to another — there’s no standard level, type or number to look for. Make sure you’ll get the kind of support your company may need, such as nontraditional work hours or different language on service help lines.

Learn whether he o she is knowledgeable about the type of products you need. Ask for examples of those that he or she has experience in. Some consultants focus solely on retirement plans, while some don’t work with them at all. You’ll want to know if a product isn’t mentioned because it’s inappropriate for your business or because his or her company doesn’t offer it. Another consideration: Are most of a firm’s systems designed primarily for large firms? If so, a small-business owner’s needs often may not be met, so it may be wise to look elsewhere.

Find out whether you’d have a dedicated account manager. With larger organizations, you may want a contact who is familiar with your company to avoid having to work with multiple representatives, retelling your story repeatedly. A professional operating on his own may not offer the level of service of a larger firm with someone focused on your account.

It’s a good idea to ask how renewals are handled. You’ll want to avoid being surprised by a renewal notice at the last minute. Ideally, the insurance renewal process would start 90 to 120 days before the renewal date with a strategic-planning meeting to set goals for the year. Once you decide on a plan, review it annually with your agent or broker to make sure it remains relevant to your company’s needs.

Should you hire a broker or a captive agent? Here’s a rundown of the two types of insurance sellers.

Brokers are independent, selling for multiple companies, and typically can provide more options and a broader view of the marketplace. Brokers will work with you to evaluate the major insurance carriers in your area on plan designs and cost. Don’t look for just the lowest premiums. Consider the breadth of the network to make sure all the employees have access to in-network physicians, and whether the carriers have good relationships with physicians.

Keep in mind that brokers often are paid on commission by the insurance company, which could be reflected in the premiums. But some brokers instead take a flat fee from an employer, such as a payment based on the number of employees and months covered.

Captive agents typically sell only one product or company. They often have a close relationship with their home office, which generally gives them more leverage to make plan changes. Their offerings also can cost less and they have access to markets that others may not have, such as workers’ compensation insurance in certain industries.

Agents are typically paid by the insurers, so the business isn’t charged for their services. If you decide to work with an agent, talk to more than one to find out what different carriers offer.

One idea popular with agents is an employee-elect arrangement, which allows small companies to choose from the gamut of a carrier’s plans. In the past, small employers could offer only one or two plans to their workers. They sometimes felt obligated to pick the most comprehensive — and expensive — plan, so that employees with greater health needs had enough coverage. But as insurers try to build market share by bestowing big-business options on small companies, there is more to choose from. Employees who need less coverage can opt for cheaper programs, thus reducing premiums.


Insurance agents and brokers can help a business owner sort through the array of health insurance plans available to find one that fits the needs and budget of a company. While some people research their options on their own, many others find the process daunting and can benefit from some professional assistance. Deciding who will help you choose an insurance plan is an important first step.

Here’s a rundown of points to consider before hiring an insurance professional, including the differences between brokers and agents.

Choose a professional with a good reputation in the industry, so ask for referrals from companies similar to yours in size and scope. Check references, as well as licenses and registrations. You can check a broker or agent’s disciplinary record by calling your state insurance commissioner’s consumer hotline. Ask if they’ve ever been sued by a client. While there is no central clearinghouse for this kind of information, you can take the extra step of doing a Web search on their names to see if anything turns up.

Services vary from one insurance professional to another — there’s no standard level, type or number to look for. Make sure you’ll get the kind of support your company may need, such as nontraditional work hours or different language on service help lines.

Learn whether he o she is knowledgeable about the type of products you need. Ask for examples of those that he or she has experience in. Some consultants focus solely on retirement plans, while some don’t work with them at all. You’ll want to know if a product isn’t mentioned because it’s inappropriate for your business or because his or her company doesn’t offer it. Another consideration: Are most of a firm’s systems designed primarily for large firms? If so, a small-business owner’s needs often may not be met, so it may be wise to look elsewhere.

Find out whether you’d have a dedicated account manager. With larger organizations, you may want a contact who is familiar with your company to avoid having to work with multiple representatives, retelling your story repeatedly. A professional operating on his own may not offer the level of service of a larger firm with someone focused on your account.

It’s a good idea to ask how renewals are handled. You’ll want to avoid being surprised by a renewal notice at the last minute. Ideally, the insurance renewal process would start 90 to 120 days before the renewal date with a strategic-planning meeting to set goals for the year. Once you decide on a plan, review it annually with your agent or broker to make sure it remains relevant to your company’s needs.

Should you hire a broker or a captive agent? Here’s a rundown of the two types of insurance sellers.

Brokers are independent, selling for multiple companies, and typically can provide more options and a broader view of the marketplace. Brokers will work with you to evaluate the major insurance carriers in your area on plan designs and cost. Don’t look for just the lowest premiums. Consider the breadth of the network to make sure all the employees have access to in-network physicians, and whether the carriers have good relationships with physicians.

Keep in mind that brokers often are paid on commission by the insurance company, which could be reflected in the premiums. But some brokers instead take a flat fee from an employer, such as a payment based on the number of employees and months covered.

Captive agents typically sell only one product or company. They often have a close relationship with their home office, which generally gives them more leverage to make plan changes. Their offerings also can cost less and they have access to markets that others may not have, such as workers’ compensation insurance in certain industries.

Agents are typically paid by the insurers, so the business isn’t charged for their services. If you decide to work with an agent, talk to more than one to find out what different carriers offer.

One idea popular with agents is an employee-elect arrangement, which allows small companies to choose from the gamut of a carrier’s plans. In the past, small employers could offer only one or two plans to their workers. They sometimes felt obligated to pick the most comprehensive — and expensive — plan, so that employees with greater health needs had enough coverage. But as insurers try to build market share by bestowing big-business options on small companies, there is more to choose from. Employees who need less coverage can opt for cheaper programs, thus reducing premiums.

He or she acts as an extension of the insurance company. A broker, on the other hand, represents the insurance buyer.

An insurance agency cannot sell insurance products on behalf of a specific insurer unless the agency has been appointed by that insurer. An appointment is a contractual agreement that specifies what products the agency may sell and what commissions the insurer will pay for each product. The contract usually spells out the agency’s binding authority, meaning its authority to initiate a policy on the insurer’s behalf. The agent may have permission to bind some types of coverage but not others.

Agents are either captive or independent. A captive agent represents a single insurer. For example, agents that represent Allstate or State Farm are captive agents. An independent agentrepresents multiple insurers.

Brokers are not appointed by insurers. They submit insurance applications to insurers on behalf of their clients, but they do not have the authority to bind coverage. To initiate a policy, a broker must obtain a binder from the insurer. A binder is a legal document that serves as a temporary insurance policy. It usually applies for a short period, such as 30 or 60 days, and must be signed by a representative of the insurer. A binder is replaced by a policy.

Brokers may be either retail or wholesale. A retail broker interacts directly with policyholders. If you have purchased commercial policies through a broker, your broker is a retail broker. If your agent or broker is unable to obtain a particular coverage you need, he or she may contact a wholesale broker. Wholesale brokers handle specialized coverages that are not readily available to retail brokers and agents. Examples are product liability insurance for a motorcycle manufacturer and auto liability coverage for a long-haul trucker.

Some insurers sell policies directly to insurance buyers without using agents or brokers as intermediaries. Such insurers are called direct writers. Direct writers tend to focus on personal coverages like homeowners and personal auto policies. However, some also offer commercial coverages to small businesses.

Commission

Some captive agents are salaried. However, most brokers and agents rely on commissions for income. Commissions are paid out of premiums charged to policyholders by insurers. These may include base commissions and contingent commissions.

Base commission is the “normal” commission earned on insurance policies. Base commission is expressed in terms of a percentage of premium and varies by type of coverage. For instance, an agent might earn say, a 10% commission on workers compensation policies and 15% on general liability policies. Suppose that you purchase a liability policy from the Elite Insurance Company through the Jones Agency, an independent agent. Jones earns a 15% commission on general liability policies. If your annual liability premium is $2000, Jones collects $2000 from you and retains $300 in commission. Jones sends the remaining $1700 to the insurer.

Some insurers pay a higher commission for new policies than for renewals to encourage agents to write new business. For instance, if the insurer pays 10% for a new workers compensation policy, it might pay only 9% when the policy is renewed.

Contingent or incentive commissions reward agents and brokers for achieving volume, profitability, growth or retention goals established by the insurer. For example, Elite Insurance promises to pay the Jones Agency an extra 3% commission if Jones writes $10 million in new property policieswithin a certain time frame. If Jones renews 90% of those policies when they expire, Elite will pay Jones an addition 2% commission.

Contingent commissions are controversial, particularly for brokers, who are supposed to represent insurance buyers. In the past, some brokers collected these commissions without the knowledge of their clients. Also, contingent commissions may give brokers (and agents) an incentive to steer insurance buyers into policies that are particularly lucrative for the broker. If agents and brokers accept contingent commissions, they should disclose this fact to policyholders. Some brokers no longer accept such commissions.

Your agent or broker should provide you with a compensation disclosure statement that outlines the types of commissions the agency or brokerage receives from its insurers. This document should state whether the agency or brokerage receives base commissions only or if it also receives contingent commissions.

Life Insurance

Agents and brokers that sell life insurance also earn commissions. However, a life agent earns most of the commission he or she makes on a policy in the policy’s first year. The commission on may be 70 to 120% of the premium in the first year, but 4 to 6% of the premium for a renewal.