First, we need to make a distinction between an insurance "broker" and an insurance "agent." In the insurance business, an agent is in partnership with one or more insurance companies. A dedicated agent has a contract with a single company, normally an insurance business that prefers exclusivity, and can only sell the insurance products of that company. An independent agent may work with a large number of companies, including AIG, CHUBB, and The Hartford, to name only a few.
A broker does not work for an insurance business but instead for a client in the market to obtain insurance. So if a new business owner wanted to purchase commercial liability insurance, a broker would not be restricted to only those insurance products sold by his or her partners as an agent would be, but could check with any commercial liability insurance provider. Brokers tend to work with non-standard, "excess and surplus" line insurance providers. These firms specialize in unusual coverage, often for emerging technologies, and generally do not enter into agreements with agents. For example, if XYZ company created a new kind of communication equipment where the potential liability risks were unknown, XYZ would most likely need to approach a broker in order to buy commercial liability insurance.
The best way to get started as a broker in the insurance business is to get a job with an established broker. There are many classes you can take on commercial liability insurance and a great deal of research you can do on the existing excess and surplus carriers, but having theoretical knowledge isn't enough to make you a successful broker. An established broker can introduce you to the people in the insurance business. After all, it is a surprisingly small world and your future success depends on the associations you make. Additionally, an established broker can steer you past the many pitfalls inherent to the industry, mistakes that could cost a client his business. It is best to make these mistakes with someone experienced at your side to catch them and instruct you as to how to avoid them. And, more importantly, you don't want to make these mistakes when you're the one paying for the errors and omissions policy, because once you are on your own, the first thing you'll need to do is get your own errors and omissions coverage. After all, even people in the insurance business need to have insurance. Any broker you work for will probably ask you to sign a limited term non-competition contract, but these usually only apply to businesses within the same state.
A broker, like an agent, is licensed by the state, with the assumption that the broker resides in the same state they do business in. Each state has its own requirements, which generally include a fee and a specified minimum level of education. An insurance business license must be renewed regularly, and continuing education courses may be required as part of the renewal requirements.
You may apply for a non-resident license, but do keep in mind that other states may have different licensure qualifications. Licensing information can be found on most states' insurance department websites. Additionally, if you intend to work in a different state, you will find it useful to have an agreement with an in-state brokerage firm for tax purposes. And if you move to a new state, you will need to get a certificate of license status from your previous state where you were licensed in order to prove that you were a broker in good standing.
James Cochran, owner of Techinsurance.com, is a web-based commercial insurance agent specializing in the Information Technology industry. Over 15 years of insurance experience, Cochran founded Techinsurance in 1997 to provide insurance products for IT professionals. Techinsurance has grown to become one of America's leading online business insurance quote providers.
