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 New York, 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 policies to consumers. They are often referred to as 'captive agents' if they represent a single insurer. On the other hand, an insurance broker represents the insurance buyer, not the insurance companies. Brokers are responsible for assisting clients in navigating the insurance market to find, compare, and secure suitable insurance coverage from potentially multiple insurers. In terms of compensation, brokers in New York must provide their clients with a statement detailing the commission that is included in the premium payments before the purchase of the policy is completed. This ensures transparency in the broker's compensation for their services. Both agents and brokers must be licensed by the New York State Department of Financial Services to operate legally within the state.