Historically all insurance cover within the United States and most of the world was purchased through an insurance broker. Insurance brokers operate within a highly regulated industry, and most of the States require that they have a license. If they act outside of the standard expected within their industry their license can be revoked. Many of the states apply reciprocity agreements which allow licensed brokers to operate across state borders. Hawaiian laws require that all life insurance brokers reside within the islands.
Until a few years ago there were limited options for purchasing life insurance, it is not a commodity you can go into a supermarket to purchase. A life insurance broker had the virtual monopoly on the sale of life insurance they were regarded as the gurus of the industry. A life insurance broker had to be qualified and many of them had extensive experience within the industry. Stringent regulations prevented larger brokerage firms from passing on rebates or discounts issued to them by the insurance companies to their customers.
Because of this the industry operated with little competition monopolized by the life insurance broker. Today that is by no means the case. Life insurance is part of a massive industry and competition to acquire new business is intensely fierce. Although the insurance industry had begun to change before the age of the Internet, the advent of Internet business changed the business of life insurance beyond recognition.
It was no longer necessary or customary to visit a life insurance broker in your small town and purchase all your insurance requirements. Suddenly the consumer could shop around and compare prices whilst sitting in their lounge. It required very little effort to compare insurance quotes. It became much easier to compare services between insurance companies because review sites gave the consumer the opportunity to read the experiences of other consumers. It also became easier to compare different policies, it had always been possible to do so; but historically you had to visit all the insurance companies and asked to physically see the policy. Now it is possible to make the comparisons online.
This forced insurance companies to become more competitive if they were not competitive they failed to get new business. Today life insurance brokers still operate within the insurance industry, but it is more likely that their business base has expanded. They now provide information that was lacking in the service markets they may assist their customers to resolve problems with benefits issues, employee recruitment and retention.
Insurance brokers today are more likely to deal with companies and small businesses rather than individuals. They still have a place in the industry because they are often invaluable in assisting small and medium businesses to find casualty insurance and cost effective life and health insurance. Corporate businesses often employ in-house insurance brokers. Independent Insurance brokers charge a commission for their services and that will range from between 2 to 8% of the price of premiums.
Insurance agents sell insurance however the advice that they give to the consumer is not necessarily impartial. Insurance agents work for a specific insurance company and their advice will be meted out to maximize their commissions. Buying insurance from insurance agents may prove to be expensive. If you choose to negotiate your insurance requirements for a broker they are by and large impartial. They have no allegiance to a specific insurance company and can therefore negotiate a better deal for their clients.
However, today cheapest method of purchasing most forms of insurance is by purchasing online. It is faster easier and accessible and in general cheaper than using a life insurance broker. The insurance companies do not have to employ agents to travel to sell the policies and their overheads are less. To encourage online business they frequently quote a more competitive price partially because they are aware that you can compare prices quickly and easily. If an insurance company does not react to the changes in the industry they lose the business and they are in these economic times very much aware of that fact.