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Difference between Health Insurance Agents and Brokers

While the terms "broker" are typically used interchangeably with the term "agent", there is a subtle difference between the two that is important to understand when requesting health insurance quotes.

Brokers are independent, selling for multiple companies, and typically can provide more options and a broader view of the marketplace. Health insurance brokers are compensated by the health insurers that they represent (which is very typically several leading insurers) to provide answers to customer questions, and to walk them through various plan options. Because they are compensated regardless of which plans they recommend for you, a qualified health insurance broker should have the proper incentives to identify the plan that is best for you. Health insurance brokers are licensed by a state’s insurance regulatory agency, typically referred to as the "Department of Insurance", although the name may vary according to state. Larger brokerage firms are usually licensed to write health insurance policies in multiple states. The state’s license board provides consumers with a venue to file complaints if they believe a licensed broker is operating wrongfully. You can also contact the state’s insurance regulatory body to verify a broker’s license information.

In contrast to brokers, captive agents sell only one product for one company. They have a close relationship with their home office, which gives them deeper knowledge of the plans for that carrier. Because the captive agent works exclusively with one health insurance carrier, the agent’s incentives will, other things being equal, mean that a captive agents recommendations for health plans will be less objective than a brokers who is representing multiple insurers. Some insurers only sell through captive agents, so be sure to contact agents of such plans, and weigh the plan options from those insurers against the other quotes you may receive. A captive agent is contractually obligated by the insurance company to only represent the products of that insurance company.

 A broker is also an agent, but never a captive agent. An agent is any licensed insurance professional that is authorized by an insurance carrier to sell their product to the public. A broker may be a Blue Cross agent, an Aetna agent, as well as an agent for UnitedHealthCare. A broker or brokerage can provide you with a list of all of the insurance companies with whom they are an authorized agent. There are agents that are not captive agents, but are also not brokers. This could be an agent that chooses to only work for one insurance company, even though he is not contractually obligated to do so.