This distinction is key as insurance works a bit counter to how the public thinks. To break it down, an insurance policy is essentially a contract whereby an individual will pay a premium (money) to an insurance carrier that will pay for potential claims (injuries, accidents, property loss, etc.), if these damages occur in a particular fashion. What most of the public is unaware of is that the insurance company is not offering a policy to the individual, it’s the inverse. When an individual completes an application, they are presenting an offer to the insurance carrier of your risk transfer, and if the carrier accepts the offer, they dictate the price. The contract isn’t bound until payment is made, but the initial design of the offer lies in the hands of the client, not the insurance company.  

If you work with an insurance agent, their responsibility is to the insurance company they are affiliated with, not to the purchaser of the insurance policy. The insurance agent only has access to sell products that are offered by their affiliated carrier, and so the options may be limited in scope to what the company is willing to take on themselves. Additional coverage for particular perils (specific causes of loss) may be outside of one insurance carrier’s risk appetite, and so they may not extend coverage for certain actions, or the price may be exorbitant to do so. There may be different insurance companies with wider appetites or lower prices, but an agent doesn’t necessarily have access to those options, so there is a higher likelihood of declinations, lesser coverage offered, or higher-than-market costs for insurance. From an insurance buyer’s perspective, how can this be avoided?

An insurance broker’s job is to negotiate on behalf of the individual, not on behalf of the insurance carrier. A broker has the ability to go to market, shop out the same risk exposure across multiple carriers, and then go back and forth with several carriers to get the best combination of price and coverage limits for their client, the individual. It’s more work, as instead of one application, there are multiple with their own formats and questions to answer. The commission (how an insurance carrier pays the insurance professional) can be less versus the compensation structure with a captive agency, but insurance brokers trade a lower commission payout for a wider net of carrier options that allow for the broker to tackle harder to write risks (coastal exposure, higher percentage of surgical procedures, adverse claims history, etc.). As there is no tie to an individual carrier, if the benefits lessen or the pricing rises above market-rate in a given year, the broker can rinse and repeat the process, going back to market and finding the best solution at the current time. It’s this level of flexibility that allows a broker to serve their clients for years to come as variables in the market change.

At CFS Dental Division, we operate as an insurance brokerage across the United States. We take pride in our market offerings, our ability to educate our clients on the pros and cons of their policy choices, and our flexibility to adapt to an ever-changing market. If you’re interested in having a partner who negotiates for you and has your back as life changes, you can reach out to us here.

Written by: Conor DePalma