What is the difference between an insurance agent and an insurance broker?

Isn’t every business that sells insurance policies called an insurance company? Can an insurance broker mean  both an individual and a company?

What are the main differences between insurance brokers and insurance agents?

An insurance broker (Broker) selects suitable insurance products on behalf of the client. It can refer to an individual or a company. It is completely independent and does not represent the insurance company alone. Insurance brokers are usually preferred when selling general insurance policies. General insurance includes: car insurance, marine insurance, and fire insurance. The insurance brokers mainly represent the interests of policyholders rather than the interests of insurance companies. Insurance brokers usually have a cooperative relationship with multiple insurance companies. For a broker, the more insurance company products they can sell the better. They do not have an exclusive sales agreement with the insurance company. Therefore, insurance brokers have an advantage in product diversity and can objectively provide customers with products from multiple insurance companies for purchase. Common insurance brokerage companies include: Convoy, Everbright Sun Hung Kai, AMTD, etc. 

Insurance agents (Agent) represent the insurance company to expand the client base, provide the company with services such as selling insurance products and claim settlement.Agents can be divided into independent agents or hired agents. Insurance agents mainly represent the interests of insurance companies rather than the interests of policyholders. Insurance agents generally only sign cooperation agreements with one or several insurance companies. If the agent only cooperates with one insurance company, the contract of both parties would specify that the agent can only sell products from that particular insurance company. Insurance agents mainly sell long-term insurance such as life insurance and critical illness, and can get more support from insurance companies. Common insurance companies include: Manulife, Prudential, China Life, AIA.

The development history of insurance brokers and insurance agents

The insurance industry did not have a unified regulatory body responsible for the regulation of the entire industry until September 23, 2019. In the past, the insurance industry adopted an industry self-regulation method to maintain industry standards, while insurance brokers and insurance agents were supervised by different organisations. Insurance brokers were previously regulated by professional bodies such as PIBA (Professional Insurance Brokers Association) and CIB (The Hong Kong Confederation of Insurance Brokers).These two institutions are responsible for registering qualified insurance brokers and maintaining registers before the Insurance Authority (IA) takes over.

In the past, insurance agents were supervised by the Hong Kong Federation of Insurers(HKFI). The HKFI is an organization established by multiple insurance companies. Before the IA took over, the HKFI had the power to register qualified insurance agents, responsible officers, and business representatives, and was also responsible for dealing with complaints about registered insurance agents, responsible officer, and technical representatives.

Remuneration of insurance brokers and insurance agents

Although insurance brokers represent the interest of policy holders, in fact, the insurance brokers’ income and commissions are provided by the insurance company. With that said, it is fair to say that the insurance company is the boss of the insurance broker. The commission of insurance brokers is generally higher than that of insurance agents even selling the same insurance plan, which can be as high as 70% of the first year’s premiums, while insurance agents get generally only 20-50% of the first year’s premiums. The advantage of working in an insurance agency is that you can build a team, hence the manager or management can get 20-40% of the commission of subordinates’ commissions. Therefore, if the team is large, it is better to be an agent than a broker. In addition, insurance agents will still have a small amount of commission on the annual renewal of the insurance, so if the customer patronizes for a long time, the income will be more substantial. In addition, agents may also have different allowances.

Who can I contact if I want to enter the insurance industry?

You can find jobs through the most popular job boards in Hong Kong, such as JOBSDB and LINKEDIN. You can also contact your insurance agent or insurance broker, or seek help from employment agencies that are active in the financial sector for recruitment, such as Paradox Management Limited.
www.paradox-management.com   

Where can I verify the identity of insurance brokers and insurance agents

You can find the public search on the website of the Insurance Authority 

https://iir.ia.org.hk/#/index

Licensing requirements for insurance brokers and insurance agents

Notes for applying for an insurance business license

According to the “fit and proper” guidelines (Guideline 23) issued by the Insurance Authority, the Insurance Intermediary Qualifying Examination (IIQE) results are valid for 2 years from the date of the examination. If candidates do not use their scores to apply for a license within 2 years after the exam, the scores will be invalid. If students take the written test, the results will not be announced on the date of the exam, but the validity period will still be 2 years after the exam date.

To apply for an insurance license, most of you must register for more than one exam and obtain passing results. To know which papers you should take, you can refer to 2cexam.com.hk/a1063_eng. If students need to take more than one exam to obtain a license, they must ensure that they pass the required exam papers and apply for a license within 2 years (from the date of the first exam). If students take the written exam, the results will not be announced on the date of the exam, but the validity period will still be 2 years after the exam date. For example: Suppose you need to take the IIQE Papers 1, 2, 3, and you choose to take the IIQE Paper 1 exam first. After taking the IIQE Paper 1 on January 1, 2021 and obtaining a passing score, you need to take the paper 2 and 3 exam before January 1,2023, and submit an application for a license by that day; in this way the exam will not be a vain. At the same time, it should be noted that the results of the written exam will not be announced until 7 days at the earliest, but the 2-year validity period is calculated from the exam date, not the date of the result released. If the exam result exceeds the two year validity period, you will need to retake the exam for which the result has expired. As long as you complete an exam combination and successfully apply for a license, and the license is  not terminated or revoked, you do not need to retake the exam again, and the license can always be effective.

Will the insurance license issued by IA become invalid?

As long as you have completed an exam combination and successfully applied for a license, and if the licensee continues to comply with some basic requirements whilst it is not terminated or revoked, there is no need to retake the exam again, and the license can remain valid.

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