Any Insurance Brokers on here?

[Storm S.]

Hello, everyone, I'm trying to figure out how insurance brokers function in California. Here is a description of the types of insurance producers in California from the department of insurance website. 

The following are descriptions of the four basic distribution methods:

Captive Agent

A broker-agent acting as a captive agent represents a single insurer, or single fleet of insurers, and is obligated to submit business only to that company or, at the very minimum, give that company first refusal rights on a sale.

Insurance Broker

A broker-agent acting in the capacity of an insurance broker is an independent insurance sales person who searches the marketplace in the interests of clients, not insurance companies, and may place coverage with any admitted insurance company. Since brokers are not appointed to represent specific insurance companies, they must post a $10,000 bond before acting as a broker. Broker bonds can be verified on this Website with the broker's name or license number.

Independent Agent

A broker-agent acting as an independent agent is a contractor who represents different insurance companies and who searches the market for the best coverage based on a client's insurance needs. However, unlike an Insurance broker, independent agents must be appointed by each insurance company they represent before placing coverage with that company. Agent appointments can be verified on this Website with the agent's name or license number.

Direct Writer

Direct writing is a method of selling insurance directly to customers through a company's own employees, usually via Internet, mail or telephone solicitations, or at airport booths. Agents and brokers are not used in this method of product distribution.

I understand what a captive agent, independent agent, and direct writer are and how they work. But my question is how do Insurance Brokers operate since they have no appointments with insurance companies. how do they receive quotes for clients? A lot of independent agents call themselves insurance brokers even though they are not. I am trying to understand the logistics of how an insurance broker operates. Are there any Insurance Brokers on here that can chime in?

[Nick Bendick]

@Storm S. I believe they can place business through other agencies which are called general agents. In my agency (an independent insurance agency) if we have a hard to place piece of business that falls out of the risk appetite with our appointed standard carriers, we have to look at secondary markets. We don't hold the appointment but are able to place the business with the general agent who holds the appointment and we receive a portion of the commission. 

It has always been my understanding that the major difference between independent agents and brokers is that brokers take a fee on top of the commission they receive while independents don't charge a fee.