What’s the Difference Between Insurance Agents, Brokers and Producers?

Insurance agents, brokers and producers all play a central role in making the insurance business run effectively. It’s probably fair to say that most people, however, aren’t exactly certain what the difference between the three terms really is. What do insurance brokers do that insurance agents do not? And what do producers do that agents don’t? Following is a description of what each of these three terms mean, and why it matters.

The Producer

As the name would suggest, a producer is tasked with "producing" sales for insurance agencies, and the term can broadly be used to describe any salesperson in the insurance business—including both agents and brokers. However, not all licensed insurance professionals are necessarily producers, meaning acting in a sales capacity.

Insurance producers need to be licensed by any state in which they’re going to be selling insurance. Most states require producers to pass an exam in their resident state and meet certain ethical and continuing education requirements, which will vary from state to state. As mentioned above, producers may be brokers or agents, both of which may require separate licensing, depending on the state.

The Insurance Agent

A licensed agent is generally someone who sells insurance for a single insurance company. This individual is considered to be a “captive” agent, meaning he or she can only sell insurance for one insurance company, like State Farm or Allstate for example. The most important difference between a broker and an agent is that the insurance agent works for the insurance companies they sell products for.

The Insurance Broker

Insurance brokers do a similar job as agents, in that they sell insurance policies, but, as mentioned above, there is a crucial difference between them. Unlike the insurance agents, brokers aren’t employed by the insurance companies they represent. Instead, independent brokers work only on behalf of their clients, the individual consumer or business. When a customer engages the services of an insurance broker, the broker will search for solutions and negotiate with several insurance companies to find the right product that meets a customer’s needs.

To complicate matters further, many insurance industry insiders will use the terms agent and broker interchangeably, calling a broker an agent, for example, when they are technically a broker.

While the distinctions between producer, agent, and broker may seem insignificant, especially to the consumer, understanding the difference can help customers navigate their way through the system and get the best possible coverage for their needs.

Here’s another crucial reason for knowing the difference: Depending on the state, licensing requirements for brokers and agents can vary slightly. The insurance licensing process is regulated individually by state insurance departments, with some states requiring brokers to go through a slightly different procedure than agents. If you are interested in pursuing a career in the insurance business, it’s important to recognize the distinctions between an agent and a broker. Then, if your state mandates it, you can be sure to get the right insurance license for whatever job you’re interested in.

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