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 Michigan, the distinction between an insurance agent and an insurance broker is based on who they represent in the insurance transaction. An insurance agent acts on behalf of one or more insurance companies, promoting and selling their policies to consumers. These agents may be 'captive,' meaning they represent a single insurer, or 'independent,' representing multiple insurers. On the other hand, an insurance broker represents the insurance buyer, whether an individual or a business, and assists them in finding, comparing, and acquiring insurance coverage from the market. Brokers are expected to act in the best interests of their clients and provide a range of options from various insurers. The compensation for a broker is typically included in the insurance premium payments, and in Michigan, as in many states, brokers are required to disclose the commission they receive from the insurance company to the client before the purchase of a policy is completed. Both agents and brokers must be licensed by the state to conduct their business, and they are regulated by the Michigan Department of Insurance and Financial Services (DIFS).