How Insurance Is Sold: Agents, Brokers, Direct, Embedded and Insurtech

The same insurance product can reach you through very different paths. Understanding the distribution channel tells you who is advising you, how many alternatives you are likely to see, and who you should call when you have a question or a claim.

Captive agents

Captive, or exclusive, agents represent a single insurer. They may be employees or independent contractors under contract with that company. The NAIC notes that a captive agent sells insurance for only one company. This model gives the insurer close control over the customer relationship and gives the customer a local contact who knows the company's products in depth.

Independent agents

Independent agents are appointed by several insurers and can offer quotes from each. They are common in both personal lines and commercial insurance, and they often serve small and mid-sized businesses that need several coverages coordinated. The agent usually owns the client relationship, which means a client can be moved to another insurer at renewal if a better option appears.

Brokers

A broker is generally understood to act for the buyer and to place coverage with insurers in the open market. In the United States, both agents and brokers are licensed as producers under state law, and terminology varies by state. Large commercial and specialty risks, surplus lines placements and reinsurance are typically handled by brokers. Internationally, brokers play a central role in markets such as Lloyd's of London, where business is placed through Lloyd's brokers and authorized coverholders.

Direct writers

Direct insurers sell through websites, mobile apps and call centers, with licensed staff answering questions. Direct distribution is common for standardized personal lines such as auto and renters insurance. It can be fast and efficient, but the buyer does the comparison shopping and the representative works for the insurer.

Worksite and employer channels

Many Americans get health, life and disability coverage through their employer. Group employee benefits are usually arranged by benefits brokers or consultants, and employees then enroll during an annual enrollment period. Voluntary benefits, such as accident or critical illness plans, are often offered at the worksite as well.

Banks and affinity groups

The Gramm-Leach-Bliley Act of 1999 removed many barriers between banking, securities and insurance in the United States, making it easier for banks to own or partner with insurance agencies. Banks may offer credit-related coverages, annuities and life insurance. In parts of Europe, Latin America and Asia, selling insurance through bank branches, known as bancassurance, is an established channel. Affinity programs offer coverage to members of professional associations, alumni groups or customers of a brand.

Managing general agents (MGAs)

An MGA is an intermediary that has been granted underwriting authority by one or more insurers. It may quote, bind and service policies, and sometimes handle claims, under the insurer's paper. MGAs often focus on niche classes such as specialty liability, cyber or high-value homes. For the policyholder, the insurer named on the policy remains responsible for paying covered claims.

Embedded insurance

Embedded insurance is offered at the moment of another purchase: travel protection when booking a flight, device protection when buying a phone, cargo coverage when booking freight, or rental car coverage at the counter. It is convenient, but convenience can hide overlaps. You may already have similar protection through a credit card, a homeowners policy or an existing travel policy. Read what is covered and compare the price with stand-alone options.

Insurtech, comparison and referral platforms

Technology companies have changed how insurance is shopped. Some are licensed agencies that quote online, some are insurers themselves, and others are comparison or referral services that connect buyers with insurers and licensed producers. When you use a platform, it helps to understand which role it plays: whether it is an insurer, a licensed producer, or a referral service, and how it is paid.

How regulation applies to every channel

• Anyone who sells, solicits or negotiates insurance must be licensed as a producer in the state where the risk is located.
• Insurers must be authorized (admitted) in the state, unless coverage is placed in the surplus lines market under state rules.
• State unfair trade practices laws apply to advertising and sales practices regardless of channel.

Choosing a channel

Polis Re is an insurance marketplace and referral service: you can compare coverage types and insurers and request a quote. Policies are issued by licensed insurers and placed through licensed producers in your state. See also why use an insurance broker.