Direct writers are employed by a specific firm and may have a specific specialty in the field of insurance. Though tied to one firm, the insurance representative can still handle any number of insurance lines: auto, home, health and life. The commission paid to the salesperson should be somewhat lower since you buy the insurance right from the source.
An agent is an independent businessperson who usually deals with a variety of different coverages and handles any number of different insurers. The independent agent may have gathered a greater breadth of knowledge across many different fields of insurance. This interaction with many firms and policies increases the agent's scope and awareness of cost-effective coverage. Though the commission for an independent agent is generally higher, as an entrepreneur, the agent may strive to give you the best service possible.
An insurance broker makes it his or her business to negotiate with different insurers for different types of policies. The broker represents you, the insurance buyer, not the insurance company, in dealing with a variety of insurers. They are particularly adept in business dealings and thus their costs may be higher.
Determining which professional to use can be frustrating. The insurance companies' true area of expertise is underwriting. The direct writer may not be as knowledgeable as the field agent in customizing an individual package for your company within a specialized field. In any case, an experienced, thorough, conscientious agent has the time and the incentive to take a generic insurance policy and give you exactly the coverage you need.
Finding an insurance representative whom you can trust and who will keep your business information strictly confidential is the key. You need a concerned insurance representative who is interested in you and your business, and will be with you for the long run and will structure deductibles that are suitable for your budget.
The labels within the insurance industry can be deceptive. The so-called "captive" agents, those who work primarily with one big company, may, when the need arises, deal with other insurance underwriters.
Excerpted from The Small Business Encyclopedia, Start Your Own Business and Entrepreneur magazine ("Needs to Know"). All information is intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an insurance agent.