Here you will learn the major legal difference and similarities between insurance agents and insurance brokers.
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An Insurance Agent is a state-licensed professional who represents an insurance company in selling and servicing policies or he is a local representative of any number of insurance companies.
In Tanzania law, an insurance agent is being defined as a person who solicits applications for insurance collects money by way or premium, and acting in accordance with the agency agreement.
In most states, insurance agents are required to undergo approximately 40 hours of passing classroom education for the type of insurance they are qualifying for to be approved to take the state insurance exam.
After successfully completing the state exam an insurance agent will need to take continuing education classes to keep her/his insurance license current.
Only insurance agents are allowed to sell and service insurance policies and only in the states, they are licensed in.
insurance broker refers to a person, who acts with complete freedom as to his choice of the undertaking and for a commission or other compensation and not being an agent of the insurer, bring together, with a view to the insurance of reinsurance of risk, the person seeking insurance or reinsurance undertaking, carry out work preparatory to the conclusion of contracts of insurance or reinsurance, and where appropriate, assist in the administration and performance of the contract in the event of a claim.
Keeton defines an insurance broker as an independent agent who represents the buyer, rather than the insurance company, and tries to find the buyer the best policy by comparison shopping.
Differences between Insurance Broker and Insurance Agent
The legal differences between an insurance broker and insurance agent hinge on their duties, and the nature of their liability;
The Insurance agents serve as an intermediary between the insurance company and the insured. They are imposed with administrative duties. The insurance agent has no duty to conduct a thorough examination of a business or to make appropriate coverage while Insurance brokers have a higher duty towards their clients i.e. duty to analyze a business, interpret the data from various databases, and secure correct and adequate coverage for the insurance business.
Insurance brokers typically charge an administrative fee or premium payments which are higher than that charged by an Insurance Agent.
Insurance brokers can be best described as a kind of super-independent agent. Brokers can offer a whole host of insurance products and services for an individual or a prospective policyholder to consider.
The liability of the insurance agent is to their customers and it is purely administrative in nature i.e. agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork while the liability of an insurance broker is on the acts of their agents.
Section 63 (1)provides that an insurance broker shall be liable for the acts of their agents and of an employee of an agent in carrying out the duties of the agent where the acts fall within the area of authority of the agent or his employee
Agents have no duty to conduct a thorough examination of an individual’s business or to make sure that appropriate health insurance coverage has been provided to the concerned individual. Rather, it is the customer’s obligation to make sure that he/she has purchased the required/desired insurance coverage.
An insurance broker will only be liable for the acts of the insurance agents if such acts are within their agency agreement.
The liability goes even further to the payment done to an employee or an agent as it is deemed that to have also been paid to the insurer or broker for whom he is an agent as provided under section 63 (2) of the Insurance Act.
Similarities between an insurance agent and insurance broker
Both insurance brokers and insurance agents must be registered/licensed. In Tanzania Section 46(1) provides that No person shall act in Tanzania as an insurance broker, insurance agent or agent for an insurance broker unless he is registered as such in accordance with the provisions of the act.
Both the Insurance Agent and Insurance Brokers are the intermediaries of the insurance business.
ReferencesSection 3 of The Insurance Act No. 10 of 2009, Tanzania  section 3 of The Insurance Act, no. 10 of 2009, Tanzania Keeton E.R (1988) Insurance Law, A Guide to Fundamental Principles, Legal Doctrine, and Commercial Practise. Pg. 80 Insurance Act No. 10 of 2009 No. 10 of 2009 Insurance Act No. 10 of 2009