Spring News Letter:
Agent or Broker…That’s the question.
As I reflected on Tom TerMaats (March luncheon speaker) comments on ethics, and as I prepared to talk about an agents perspective of changing market trends at our luncheon this month, there was one thing that became very clear….the fine line between Agency law and Broker law has become very blurred in Michigan.
When I went to “the dark side” and joined the agency ranks back in 1986, the distinction was very clear. As an Independent Agent, we are licensed as agents by the carriers to represent them in the marketplace. Fee Agreements aside, we are technically paid by the carrier, not the insured. With most carrier policies we (the agent) countersign the policy as a representative of the carrier. We are even paid in most instances a portion of the insurance company’s profit (based on the experience of our book) at the end of each year. We are Agents!
On the other side, the terms “Agent” and “Broker” appear to have become synonymous in today’s Michigan insurance environment. I can’t count the number of times over the last 5 years I have had to make that distinction in a conversation with younger (and even some more seasoned) agency personnel. It can even become more blurry when you work as an Agent for a National Broker. Try and explain that to a new insurance person J. Per Tom TerMaat, according to the law, when a dispute comes up between an insurance company and an insured, in certain instances, the “agent” must be on the side of the insured…How does that work when we are legally a representative of the carrier? No wonder this gets confusing!
So why am I making this such a big deal? I believe the Agent/ Broker distinction is one of the main foundations when making a good number of the ethical decisions we all make in our industry. I always tell my clients that “notice to Agent is notice to Company”. In other words, anything that you share with me, you have already shared with your insurance company as I am a representative of that company. In the same conversation, I also tell them that as a representative of the carrier, their insurance company wants to partner with them to adequately cover their exposures and keep them from potential bodily injury or economic ruin in the event of a claim. As the Agent, I am the vehicle of that partnership and a good partnership needs to have trust between the partners. We will work through anything that comes up, always looking for a fair resolution.
As Agents, we are front line underwriters, adjusters, loss control reps, and (sometimes) premium collectors of our carriers. As carriers, we need to remind our Agents of the responsibility they have, but we also need to treat them as partners, not adversaries. The Carrier/ Agency relationship works best when a true partnership relationship exists between them. Remember, “a good partnership needs to have trust between the partners”. I believe that we need to continue to live our roles in a very clear and defined manner; continuously striving “to maintain and uphold a standard of honor and integrity that will reflect credit on (my) our profession” within the Agency Law system of insurance in MI.
At least that’s how I see it.
Jim Heyboer, CPCU, LIC
President, West MI CPCU