An insurance broker may be an individual or company that works as an agent between an insurance company and a customer trying to find the most appropriate insurance policy for the situation. Usually a broker works independently with the customer�s best interests in mind, but they may be affiliated as an agent with a specific number of policies or insurance companies. Broker�s may work on a commission basis, in that they get paid by an insurance company for referring them business, or they may work by charging a client a fee for providing their service of searching out the best insurance policy for them. In some instances it may also be both.
With the rise of the internet, a lot of insurance comparison is completed online and the typical business model has changed to using a website with comparison tools. The same commission system is still applied. More personal in depth services are still offered on a one to one basis.
In the United States insurance brokers are closely regulated and must apply for a broker�s license for their practices to be legal. Each state follows similar guidelines but issues their own licenses. Having a license in one state does not necessarily mean a broker can practice in another state, although the application process can be sped up if a license in another state is held. Hawaii is an exception, where all brokers must be residents of Hawaii.
Due to various laws there are many smaller brokerage firms, compared to a few large monopoly holders. This is because it is illegal to offer the rebates or discounts that might cause �the little guy� to go out of business. This means firms often only have their name and reputation to market their services.
It is not always necessary to go through a broker to obtain insurance, and it is possible to deal directly with insurance companies.