Officially, an Agent is an individual or company that acts on behalf of the insurance company to market, sell and service insurance. The Agent has a contract with the insurance companies in order to represent a specific insurance company. A broker is person who also contracts with insurance company but officially acts on behalf of you the client. All agent and agencies are compensated by the insurance companies and therefore are at no cost to you. The difference between agent and agency is that agent is individual contracted with insurance companies and agency usually has many agent working under umbrella of the agency. In most cases agents working under agency are employees.
Agents role is to find best possible and the most affordable option for your money. In most cases there is no incentive on the agent’s part of which company you decide to go with. How agents get paid by the insurance company is strictly regulated by the insurance commissioner. When looking for agency or agent make sure that they are brokers who represent as many health insurance companies as possible. There are dozens of plans on the market, therefore finding agent who can get you the best possible plan for your money will save you thousands long term. Just looking a rate quote and benefit summary is only half of the story when choosing health insurance. Some plans exclude certain benefits or apply caps to other types of coverage. Agents know the lay of the land and you would personally not want to purchase health insurance just based on a rate quote.
Some insurance companies have captive agent representing them. Captive agents can only represent one insurance company. They are essentially employees for that company. I would avoid such companies as they may not have the best interest of the client at heart. If a company cannot quote multiple carriers, beware. The major carriers in California are Blue Cross of California, Blue Shield of California, Health Net, Pacificare, and Kaiser. Beyond these five, we do not feel very secure about the others.
How are agents or brokers paid? Agents are paid a commission by the carriers for policies issued and in force. The commission tends to be about the same from carrier to carrier. This commission does not affect the rate. The insurance rate you will get through an agent/broker is the same as you would get going directly through the insurance company. The benefit of the agent relationship is that they navigate the insurance company to expedite processing, help with service issues once enrolled, and act a third party. Insurance company’s main interest to keep you enrolled as policy subscriber but your interest may actually lie with another insurance company or plan. An independent broker can help bridge the two at no additional cost to you.