Any business’s success will depend largely on its sales force. In the insurance industry the sales forces is referred to as insurance intermediaries. They are the link between the company and the consumer and most often have a close relationship with the client.
Broker – an independent business person who may place business with a number of insurers. This person has an obligation to meet all of the clients and companies needs.
Agent – represents one company only.
A general agent – has the authority to manage all of a companies business with in an assigned territory.
There are several types insurance distribution systems in the property/casualty industry.
- Independent brokerage system –sells insurance for many companies and gets paid a commission.
- Exclusive Agency system – agency sells for only one company but agents are paid a commission and must pay their own expenses.
- Direct Writing – employees work for the company and are paid by salary usually with some commission incentives.
A legal relationship exists between an insurer and broker. This is referred to a principal and agent relationship. An agent is a person authorized by another to act on his or her behalf. Under common law agents act on behalf of their employer in contractual matters. In Quebec the relationship is simialr but called Mandator (principal) and Mandatee (agent).
Intermediaries are subject to some government regulation. But mostly intermediaries are self regulated. In Ontario the regulatory body is RIBO their responsibilities include: qualification, licensing, operating requirements, renewal of license.
