EXPLAINING INSURANCE TERMINOLOGY:
What is an insurance broker, producer, insurance agent or agency, and if I buy my insurance policy from one of them does it cost me more?
These are all intermediaries between you as the insurance policy buyer and the insurance company carrier. Each has a legal duty, as a state licensed insurance sales representative, to help you to obtain the appropriate insurance coverage at a reasonable price. Typically, the agent, agency, or producer represents the insurance carrier. The insurance carrier pays the agency, agent, or producer a commission based on the sale of the insurance policy. The commission rates are as high as 30% of the annual premium. The agent is either a captive agent selling for one specific insurance company such as a big name brand carrier, or an independent insurance agent selling multiple products for many insurance carriers. The Broker represents the insured and has no contractual relationship with the carrier.
When you purchase your insurance policy, no matter what type of policy, it is worthwhile to ask what the commission is. Picture the insurance premium as an air-filled balloon. The balloon can swell or shrink depending on many factors, but up to 30% of the air in the balloon goes to the commission paid sales producer or agency. It is common for some policies to have unclear language, be silent on certain coverage incidents, have weak coverage, no coverage for certain incidents, and low benefit levels for certain incidents in order to preserve underwriting profits which are then used to pay the high commissions. The premiums are still set high or at market levels to keep the balloon inflated to look like a legitimate insurance policy.
The Lesson: Just remember that the NASW Risk Retention Group’s professional liability, general liability, and the cyber liability insurance policies are the most comprehensive and priced the best for social workers. The Board of Directors, comprised of social workers and insurance experts, approved all of these policies. They also make sure that underwriting and claims are processed fairly. The financial benefits generated from the NASW family of insurance companies go back to the NASW and you as a policyholder in the form of policy benefits. Too often insurance shoppers only compare price and think they have certain coverage when they don’t.