Most people mistakenly believe that insurance agents and brokers are the same thing. But the truth is, the significant difference between them highlights the health insurance industry’s tragic flaw. Read on to learn the difference between a health insurance agent and broker and the expensive impact those differences can have on you.
The Health Insurance Industry’s Tragic Flaw that Nobody Knows About
When selecting a health insurance plan, it’s important to know you can trust the person helping you pick a plan. But when you’re dealing with a health insurance agent, instead of a broker, the person serving you may not have your best interests at heart. Though insurance agents surely care about meeting your coverage needs, they will be limited in what products and plans they can offer in ways that insurance brokers are not.
So, what’s the tragic flaw? While health insurance agents and brokers both serve as intermediaries between the health insurance company and the client, the differences in how each is compensated may have very significant impacts on where their loyalties lie. Understanding how agents get paid, versus how brokers get paid, can help you make an informed decision when it comes to selecting a partner to help you find (and manage) the health insurance plan that’s right for you.
How Health Insurance Agents Get Paid
Health insurance agents are paid by the carrier they represent. In fact, they are often considered “captive agents,” which means they can only offer plans and products from that specific carrier, even if these are not the best options for the client. Their salary and commissions are paid by the insurance company they represent, and the quotes they are able to offer are specifically set by the insurance company as well. When agents are appointed to sell a carrier’s products, they sign an agreement that identifies the products and plans they can offer as well as the prices (and commissions) for each.
Why is this a problem? Their ongoing relationship is with the carrier, not the client. They will be more focused on maintaining that relationship—by selling as many policies as they can—rather than ensuring your insurance needs are being met. This may translate into unchecked cost increases for you or poorly managed insurance plans.
How Health Insurance Brokers Get Paid
Health Insurance brokers, on the other hand, represent (and are paid by) people looking to buy insurance. As a result, their primary focus will be finding the best insurance plan that will meet all of their client’s coverage needs. While they still receive commissions for each policy they sell, they are able to shop the entire industry to find the plan that best fits their client’s specific needs. An insurance broker will be focused on maintaining their relationship with you, monitoring and managing your plan throughout the year to make sure your evolving needs and ongoing paperwork are being taken care of.
Insurance brokers are considered industry experts. They are well-versed in health insurance laws and regulations and must obtain the necessary credentials to be able to act as intermediaries between their clients and the health insurance carriers. Because they shop the entire market—rather than just one carrier—to find their clients’ best coverage options, insurance brokers also have a keen grasp on the market and industry trends.
Insurance brokers are invested in their ongoing relationship with you, the client. They will be motivated to best meet your needs, rather than the needs of the insurance carrier they represent. This means they’ll always be there for you, to answer and handle any issues that should arise.
How the Insurance Industry’s Payment Structure Impacts You
The sad reality is this—agents and brokers both get paid, no matter how they behave or where their loyalties lie. Many people think they only have to select a health insurance plan one time, and once they do, they tend to forget about it. But like any other kind of insurance, health insurance premiums have a way of creeping up. And if you’re not shopping your plan every year, you may be under or over covered, paying premiums that are far above what you should be paying. While an agent may only think of you at renewal time, a broker will be thinking of you all year long, checking in to make sure your coverage is matching your personnel needs and ensuring that you have the best rate they can get you.
Your insurance intermediary should be there for you throughout the year, answering questions on how to use your benefits and steering you through life changes. Agents and brokers are both able to do this. However, the payment structure of agents versus brokers makes agents less inclined to take an active role in a partnership with you.
AUI’s Loyalty to You
At AUI, we’re committed to a long-term relationship with, and heartfelt responsibility for the success of, our clients. We are passionate about the quality of our partnership with you and are invested in your success. We work on your behalf, offering you access to a wide range of carriers, products, and plans (some of which are exclusively offered through AUI) to best suit your specific coverage needs. When you decide to work with us, you will be gaining a partner committed to creating and fully implementing a custom benefit package that meets your needs, is helpful to your employees, and fits your budget. Contact us today to learn more!
