Insurance 1-2-3: Intro to Understanding the Orlando Insurance Industry
While most Americans understand the practical value of auto and homeowner’s insurance, few actually understand how the insurance industry is structured. Even fewer understand the nuances and intricacy involved in funding, supplying and obtaining personal insurance policies that can fully protect consumers’ assets. Orlando consumers often obtain little education about the mysterious risk management industry, thus when it comes time to obtain new insurance coverage it’s hard to know where to begin.
The first step in understanding how insurance works, is grasping what insurance actually is. Insurance is essentially a risk management strategy through which an individual can transfer the financial responsibility of potential loss to an insurance carrier or company by paying a smaller fee called a premium. Insurance companies and carriers are business entities that write policies, agreements between the consumer and firm outlining terms of coverage. Typically funded by investors and banks, these companies have financial resources specifically designed to reimburse consumers for their financial loss from specified hazards. For example, many drivers obtain auto insurance so that if they are in a collision their insurance company will pay for property damage and medical expenses which can accumulate rapidly to sums the individual could not pay on their own.
Consumers rarely interact directly with their insurance providers; more often they deal with their local agent or broker to facilitate their insurance coverage needs. Many consumers don’t know that there is a distinct difference between an agent and a broker as the two terms are often used interchangeably. In the industry however, the two types of professionals offer different services to their clients.
Brokers are licensed specialists trained and educated to assess risk exposures and other factors. Their professional duty is to secure the correct and adequate coverage suitable to their client’s needs. They generally have access to a wide network of insurance carriers which allows them more flexibility to explore different coverage options. Brokers often charge administrative fees and premiums are generally higher when insurance is purchased through a broker.
Agents act as professional intermediaries between consumers and insurance providers. Like brokers, an agent’s primary responsibility is to facilitate insurance coverage for their client. However, agents are not always responsible for investigating a buyer’s coverage needs. That responsibility often falls upon the client. Customers are often expected to understand and estimate their own risk exposures and seek the proper coverage to fit their established needs.
There are three types of agents: direct, captive and independent.
- Direct agents are employees of the insurance provider. These agents report to and work for carriers to provide consumers direct links to the company. Many large companies operate in this manner.
- Similarly, Captive agents are professionals who work with a single insurance company but are not officially employed by that company. They are often highly knowledgeable about the specific of the carrier they represent and can help clients navigate the ins and outs of a specific provider.
- Independent agents, as their name suggests, are individuals who are not bound to a single carrier and tend to have access to a variety of coverage options from multiple different company. Independents can write policies for any of the agencies they represent and are often familiar with the specific advantages of working with one company over another in a given circumstance.
When searching for insurance in Orlando, cost is the number one consumer priority. As a result many consumers choose to patronize large insurance carriers assuming that these providers will have the best prices. In some cases this is true; however in many cases working with small domestic agencies or brokerages can actually prove more cost efficient.
According to the Center for Insurance Policy and Research, there are nearly 1 million agents and brokers operation across the United States. Florida has the second highest number of local agencies in the nation. One of the largest advantages of working with Orlando insurance agencies to protect your assets is the personalized care and practical local expertise regarding regional risk factors. When working with a multinational company sometimes the nuances of your native risks are overlooked, or worse excluded from the policy you obtain. Domestic agencies are more accustomed to dealing with the specific insurance needs of Floridians and their assets. If you would like more information about working with local agents to better protect your personal property, give us a call at (407) 859-3691.