Although the terms “insurance agent” and “insurance broker” are sometimes used interchangeably, there is an important distinction between them. Persons with these job titles both work to facilitate the purchase of insurance policies by coordinating between (1) persons and entities who are interested in purchasing insurance policies and (2) insurance companies who are interested in selling insurance policies.

The primary difference between an insurance agent and an insurance broker is who they represent in a transaction—and thus where their loyalties lie. An agent represents one or more insurance companies and a broker represents the insurance buyer—whether an individual or a business.

An agent—sometimes referred to as a captive agent—generally provides information about insurance policies (sometimes called “product”) available from the insurance company or companies the agent represents. In contrast, an insurance broker “goes out into the market” and helps the consumer or business owner find, compare, and acquire the appropriate insurance coverage through one or more insurance policies.

An insurance broker’s compensation for helping a client find, compare, and acquire the appropriate insurance coverage is included in the premium payments made by the client (insured) who purchased the policy or policies. A broker should provide a client with a statement detailing the amount of the premium that will be paid to the broker in commission before the client completes the purchase.

In Maryland, the distinction between an insurance agent and an insurance broker is legally significant. An insurance agent acts as a representative of one or more insurance companies, promoting and selling their insurance products to consumers. These agents are often referred to as captive agents if they represent a single insurer, or independent agents if they represent multiple insurers. On the other hand, an insurance broker represents the insurance buyer and is tasked with finding the most suitable insurance policy for their client from the available options in the market. Brokers are obligated to act in the best interests of their clients, providing advice and assistance in selecting and acquiring insurance coverage. In Maryland, insurance brokers must disclose their commission, which is included in the client's premium payments, before the client finalizes the purchase of an insurance policy. Both agents and brokers in Maryland are required to be licensed by the Maryland Insurance Administration, which enforces regulations to ensure they operate in compliance with state laws and act in the best interests of consumers.