The Marketing and Selling of Insurance INDEPENDENT AGENTS

An independent insurance agent is a person who is licensed by the department of insurance in the state (or states) where he or she conducts business. Licensure generally involves passing a written examination to show that the person meets minimum standards of knowledge regarding the business of insurance. Independent agents are typically parties to contracts with several insurers by which the agent is authorized to write business (i.e., policies) for that insurer. In most states, each insurer files a notice of appointment of each agent with the department of insurance in that particular state. Independent agents are usually compensated by the insurers they represent through payment of a commission that is a fixed percentage of the premium of each policy sold. This commission percentage may vary with the size of the premium or line of business. For example, insurers often pay higher commissions on commercial lines policies than they do on personal lines policies. This is due in part because the underwriting and production of personal lines policies is often less complex, presenting fewer variables, and typically involves smaller premiums per policy. The administrative costs to the insurer of issuing a commercial policy for a small business and a personal lines policy are roughly the same. Independent agents frequently state that one advantage of dealing with an independent agent is that he or she often has the flexibility to obtain competing quotes from several insurers. These competing quotes may offer the insured broader or lesser coverage in response to greater or lower premiums, thus offering the insured a range of choices. An independent agent will not have a State Farm, Farmers, Allstate, or Nationwide logo in their Yellow Pages ad, or over his or her office. Independent agents are often members of professional/trade organizations, such as the Professional Insurance Agents (PIA) organization or Independent Insurance Agents (IIA) organization. Their advertising in the Yellow Pages and otherwise will usually make clear that they are independent agents, especially the fact that they represent several companies. In some regions, the Yellow Pages will have listings of agents who represent particular insurers that conduct their business even though they are independent agents—so checking by a particular name, such as Hartford or Kemper, may help you identify local independent agents.

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