I have been asked this question several times- How does your agency make money?
Brokers have the ability to write insurance with a host of carriers. While an agent just writes one product like, State Farm, Farmers and AAA.
My answer is simple, we charge fees. Most large carriers do not charge fees, so why are brokers even competitive in the auto insurance market? You must remember we provide policy production and filing. Insurance carriers give brokers discounted rates that enable brokers to charge a competitive premium. The fee is typically associated with the price and is paid in full upon the down payment. This fee typically goes towards the overhead and profit. For an insurance brokerage this fee is very crucial, it allows them to stay viable in an extremely competitive market.
Not to mention working with a broker is far different than working with a large insurance agency. Brokers are typically more hands on, knowledgeable and more responsive. A large agency uses call centers, are not as flexible to make policy changes or endorsements. Also, a large insurance agency looks at each client as another number or insured client. A broker learns and understands intimate details of the potential client which helps them better understand their risk or lack of risk. You do not want to overpay for a policy that is too large according to your risk and obviously you do not want to underinsure yourself and lose assets over lack of insurance coverage. A broker is can shop for the best price and coverage to meet your budget and coverage needs. A large insurance agency will have one product for you and will typically try to fit your needs to their product. While and insurance broker will shop around and find the best company that will fit your needs.
The diversity of an insurance broker also allows them to write coverage and provide filings for a customer that a typical agency cannot provide. For example, if a customer with a large agency like State Farm is convicted of a DUI. They will typically be dropped or their premium will skyrocket. A broker again will have a company that will provide SR22 insurance filing to the DMV and while protecting their premium.
A broker just simply can provide a host of options to customers. One of the major problems for a broker is exposure. Large insurance agencies are making so much money they can market like crazy. Just watch TV for more than twenty minutes. How many auto insurance advertisements are you going to see?
About the Author:
Jarrett John Mahoney is owner of Breathe Easy Insurance Solutions. One of the leading insurers in the country for SR22 Insurance filing and DUI insurance protection. Breathe Easy Insurance Solutions, is a member of CDLA, the Private Defenders, CACJ,NACDL and MABA. They are also recognized as one of the fastest growing insurance brokerage's in the county.