Health insurance brokers vs. agents: What's the difference?

Health insurance agents and brokers both help individuals and businesses find health insurance, but there are key differences between them. Here, we'll explore some of those distinctions between an insurance broker vs agent.

What is an insurance broker?

An insurance broker helps clients find and compare insurance policies from multiple providers. Unlike agents who work for a specific insurance company, brokers are independent and represent the interests of their clients rather than insurers. 

These licensed professionals typically earn commissions from insurance companies but may also charge service fees, particularly when assisting businesses with group insurance plans. When working with an insurance agent, it’s important to clarify how they get paid. 

Many insurance brokers employ insurance agents to expand their reach and often offer a variety of insurance types, such as health, auto, home, and life insurance.

There are two main types of insurance brokers:

• Retail brokers: Work directly with individuals and businesses, help clients find general insurance policies that meet their needs, and assist in selecting coverage and connecting with insurance providers

• Wholesale brokers: Specialize in complex or high-risk insurance plans, do not interact directly with policyholders, and provide specialized insurance products to retail brokers or agents. (Covered California)

What is an insurance agent

An insurance agent sells health insurance plans (or other types of insurance policies) on behalf of different insurance companies (although some represent just one insurer) and is licensed by the state they work in. Insurance agents help individuals find coverage for themselves or their families. They also help clients compare policy types and enroll in plans, taking a lot of the burden off the consumer. 

Insurance agents aren’t allowed to charge fees for their services when assisting with individual or family plans. Instead, they earn compensation via commissions the chosen insurance provider pays. 

If you already know which insurance company or plan you want, working with an agent can make the enrollment process easier. There are two types of insurance agents you can work with:

• Captive agents: Represent only one insurance company, may be paid through salary or commissions (or both), have in-depth knowledge of their specific company’s plans, and work as employees or independent contractors of the insurer.

• Independent agents: Represent multiple insurance companies, earn commissions from the insurance providers they work with, represent the applicant rather than the insurance company, and offer a wider variety of plans, giving consumers more options. (Covered California)

Insurance broker vs agent

It’s easy to see why consumers get confused about the difference between insurance broker and agent. Understanding the similarities and differences between these roles can help you choose the professional who can assist you best. 

Similarities

Both insurance agents and brokers help individuals and businesses navigate the complex world of insurance by providing expert guidance and assisting with plan selection. They work to understand their clients’ needs and recommend suitable coverage options, ensuring that people make informed decisions about their insurance. 

Whether working with individuals, families, or employers, both professionals simplify the process of comparing policies and securing coverage.

Differences

One of the main differences between an insurance broker and an agent is whose interests they represent and who pays them for their work. An insurance broker represents the interests of consumers rather than a specific insurance provider, but agents can represent more than one provider. It’s important to remember that insurance brokers don’t sell insurance directly. Instead, brokers help their clients compare policies from multiple insurers so they can find the best fit. While they facilitate coverage, the actual enrollment is completed through an insurance agent. Brokers earn commissions from insurance companies and may also charge broker fees. (Experian)

Which is right for your company?

Despite their differences, both agents and brokers help individuals and businesses navigate insurance options. They assist with plan selection, ensuring clients understand their choices and find suitable coverage. So, which is right for you?

• Insurance broker. Choosing an insurance broker can be beneficial if you want to explore multiple insurance options without being tied to a single provider. Brokers can save you time by researching and comparing different plans, gathering quotes, and providing expert guidance to help you make an informed decision.

• Insurance agent. An insurance agent is a good option if you have a preferred insurance provider or need help selecting from different plan levels within a specific company. Agents can guide you through the enrollment process and ensure you get coverage that fits your needs.

Benefits administrators can collaborate with insurance agents and brokers to streamline the process of selecting and managing healthcare plans for employees. Agents can assist in navigating plan options within a specific insurance provider, helping administrators understand coverage details, pricing, and enrollment procedures. They can also ensure a smooth onboarding process by handling paperwork and compliance requirements.

Brokers, on the other hand, provide a broader perspective by comparing plans from multiple insurance companies. They help benefits administrators evaluate different carriers, coverage levels, and pricing structures to find the best fit for their workforce. Brokers can also offer insights into industry trends, cost-saving strategies, and regulatory updates to optimize healthcare benefits.

Sometimes, the solution is to work with both an agent and a broker. By working with both agents and brokers, benefits administrators can offer employees tailored healthcare options while simplifying plan management. This collaboration ensures that companies provide competitive, cost-effective benefits that align with both employee needs and organizational goals.

Are you a benefits administrator looking for help? Thatch can help you spend less time managing employee benefits and related issues and make it possible for you to provide better, more flexible healthcare for all employees. Sign up for a free demo of Thatch today.