The Structure of How an Indepedent Insurance Agency Works

Written by Stephen Lim, Lic #0M66738

Understanding how an agency works for you may be critical in your deciding factors as to whether or not they are a good fit for you when searching for Medical Malpractice insurance or any other type of commercial insurance for your healthcare practice.

There are a few different types of agents.  Depending on the type of agent you talk to, their motives may be different, but the outcome is the same, we are all in service of providing an insurance policy.  

1. The first is a direct or captive agent; this is an agent who works directly for the insurance company and solely for one company, and their true allegiance is to the insurance company they work for.  They are able to provide clients with very detailed and up-to-date information about the coverage they are selling but could be less aware of other products in the broader marketplace.  

2. The second is an independent insurance agent who works with multiple insurance companies and has the authority to quote and issue insurance policies for the insurer(s) they represent.

3. Lastly, an Insurance Broker is an insurance agent that works on behalf of the client to provide solutions for their liability insurance management.  They will often have access to multiple different insurance companies and will have a duty to the client and not the insurer(s).
   

The main differences between an independent insurance agent and an Insurance Broker are the following:

1. Agents can bind coverage since they work for the insurer, but brokers cannot.

2. Certain agents may be obligated to sell specific insurance products, but brokers do not have such requirements.

3. Agents represent insurance companies. Brokers represent their clients.

California Attending Physicians Insurance Agency is a brokerage dedicated to providing guidance support, and education to healthcare professionals.  We are Insurance Brokers who primarily provide Medical Malpractice Insurance and other commercial lines of insurance, including general liability, workers’ compensation, cyber coverage, and much more.  So how does it all work?

We are, what you call, a Retail Agent for those who deal with clients and businesses directly.  We’re responsible for making sure we have access to a number of different insurance companies so that we can provide multiple quote options to our clients.  In order to do this, we have direct appointments with insurance companies such as The Doctors Company, Coverys Insurance Company, The Hartford, and many more.  We also access many of our insurance companies through a Wholesaler, also known as an MGA, Managing General Agent, who has access to non-admitted insurance companies for off-risk and hard-to-place submissions.

Retail brokers make about 8 - 20% of the premium in commissions, and this can vary from among the companies and whether or not we have a direct appointment with the insurance company.  Does this mean you can get the insurance for cheaper by going direct?

Unfortunately not, the premium is rated accordingly to your risk (county, patient count, hours worked, types/counts for provided services, staff count/designation, claims history, etc.) regardless if there is a captive agent or retail agent involved.  However, you may pay a nominal fee in addition to the premium to a broker for their services.

Ultimately, you will have more options to choose from with a broker versus dealing with multiple captive agents.  With Medical Malpractice Insurance, there is typically no premium difference; however, with other lines of insurance, such as Workers' Compensation or Business Owners' Policy, going with a broker may prove to save you more money as they have the ability to apply discounts with some carriers.