Why use a Broker/Agent to deal with Insurance Company?

Question

Four Questions:

1) Why not cut the middle man out (broker/agent) and come to a deal directly with an insurance company (auto insurance, or home insurance)?

2) If they only deal with brokers/agents then why?

3) Why not just get my license to become a registered agent/broker, not go into business, and get my insurance at a significant discount that way?

4) How do brokers/agents get paid? When i see my yearly premium on my auto/home insurance is a percentage of that going to be paid out to the broker/agent..if so then how much can i save if they werent there?

Answer 1

People pay a mark-up for most things. The average retail mark-up is 50% to 100%.  Real Estate is 6%.  

Most brokers work for about 5% to 10%.  Most brokers leverage their knowledge and connections to carriers to save lots more than 10%; most clients don't go with me unless I save them at least 20%, which I can often do, by educating my clients and helping them be savvy shoppers.  

There are direct writers out there for auto & Homeowners; geico, progressive, etc. They pay out A LOT more for ads and inside sales people than they would to brokers, but that is their niche.

Answer 2

The insurance business is highly regulated by government-on the state level--you need to be licensed in order to sell it. If you obtained your license--passed the exam, and got appointed by a company, you could get a discount on your own insurance. If you are writing for allstate for example, you do get a "good neighbor" discount, which is for employees. But, if you weren't really working and producing more business, you wouldn't keep your appointment long, and would lose you discount, eventually. Also, you will still get a commission on your own business, but you also have to pay income taxes on your income. Even if you could "cut out the middle man" ( which you can't-the insurance industry has sales people precisely because the companies want that system) after you get through with your licensing fees, continuing ed requirements, and paying taxes, it would hardly be worth it to you.

Answer 3

You will pay the same premium even if you don't use a broker or agent.  It is illegal in most states for companies to rebate to customers.  Therefore, you must pay the same premiums if you have an agent or not.  Why wouldn't you want a buffer between you and the company to look out for your best interest?