Is It Cheaper to Get Insurance Through an Agent: Direct vs Agent Pricing, Fees, and Who Gets Paid

An insurance agent does not automatically make a policy cheaper or more expensive. The price depends on the insurer, the risk, the coverage, the sales channel and any fee you pay yourself. Independent agents may quote several insurers, while captive agents generally represent one, according to the NAIC (opens in a new tab). Agents commonly receive a commission from the insurer, and some brokers or agencies charge a separate fee. To compare fairly, get written quotes that use the same limits, deductibles, endorsements, exclusions and personal or business information, and ask who the intermediary represents, how they are paid and whether any fee applies.

Is insurance cheaper through an agent?

There is no rule that settles it either way. Direct policies may cost less because the company does not pay an agent commission, per the NAIC, but that is a possibility and not a result you can count on for every person, insurer or policy. An agent can also find a lower price in some situations, since an independent agent can quote more than one company. What you pay in the end turns on the insurer's rates, your own risk facts, the coverage you choose and whether a fee is added.

Price is what brings most people to the question. A J.D. Power 2019 U.S. Insurance Shopping Study (opens in a new tab) found that 64% of shoppers named price as their main reason for shopping and that shoppers collected an average of three to four quotes. That study measured shopping behavior and satisfaction, not the premium difference between identical policies sold through an agent and directly.

What is the difference between buying direct and using an agent?

Four routes are common:

• Direct. You buy from the insurer online, by phone or by mail, without an intermediary.
• Captive (exclusive) agent. The agent sells one insurer's products.
• Independent agent. The agent may sell policies from several insurers, and the choices are limited to the companies the agency is set up to sell for.
• Broker. A broker generally represents you, the customer, and may charge a fee.

Direct, independent-agent and exclusive-agent purchases are all ordinary ways to buy, per the NAIC's guide to choosing an agent (opens in a new tab) and homeowners consumer guide (opens in a new tab).

Who does an agent or broker represent?

Agents represent insurance companies, and brokers generally represent the customer, per the NAIC. An independent agent sells for several insurers, but the market available to you depends on the agency's insurer appointments and whether you qualify with each company. So, "independent" describes an agency's range of carriers, not access to every insurer.

When you talk to any intermediary, ask who they represent on your policy and which insurers they can quote. The answer tells you whose rules they work under.

How are agents and brokers paid?

Independent and captive agents are paid a commission by the insurance company for selling policies, according to the NAIC. A premium is what the consumer pays for a policy, and a commission is what an insurer pays an agency for a sale, according to the trade group Independent Insurance Agents and Brokers of America (opens in a new tab). For life insurance, commission is built into the premium rate, per the Insurance Information Institute (opens in a new tab), and how compensation works differs by line of insurance and by state.

There is no single national commission percentage, so the useful move is to ask the agency directly. Some agents and insurers also receive contingent commissions, which are extra compensation that can depend on factors such as loss ratio, retention or the size of an insurer's book of business, as the NAIC has discussed (opens in a new tab). Those differ from the ordinary commission on a sale.

Can an agent charge a separate fee?

Sometimes. Possible charges include policy or placement fees, broker service fees, fees for specific consulting services, commercial placement fees, administrative or service fees, and surplus-lines or wholesale-broker charges where they apply. Whether a fee exists, how much it is, when it is due and whether it is refundable depend on state law and the transaction.

Each state sets its own rules on producer fees, compensation disclosure and licensing, through its insurance law and its state insurance department (opens in a new tab). For example, Connecticut addresses producer service fees and commissions in Conn. Gen. Stat. § 38a-707 (opens in a new tab), and when a customer pays a producer directly for the initial placement, § 38a-707a (opens in a new tab) generally calls for the customer's documented acknowledgment and disclosure of what the insurer or a third party is paying. Connecticut also bars paying or accepting a commission or fee for selling insurance when the person must be licensed and is not (§ 38a-702l (opens in a new tab)).

Fee structures can be flat fees, per-contract fees, per-service fees, per-employee fees or percentages of premium. Many states require client-paid fees to be documented and agreed to in writing, and states differ on charging a fee for placement services when the producer also earns a commission, according to the trade group Council of Insurance Agents and Brokers in its compensation compliance outline (opens in a new tab). Your state's law is what applies to your purchase.

Before you accept a quote, ask for the amount, purpose, timing and refund terms of any fee, in writing.

Can an agent quote the same insurer at the same price as the website?

It depends on the insurer, the product, the channel, the underwriting and the filed rates. Progressive sells by phone, online and through independent agents, and its prices vary based on how the customer buys. Prices for policies sold through agents and brokers are available from those channels, per its agent page (opens in a new tab). That is one insurer's own distribution model, and other companies set rates their own way.

For your own comparison, ask for the written quote, the exact insurer name, the policy form and the coverage terms. If the agent's quote and the website's quote differ for what looks like the same company, ask the agent to explain the difference.

How should you compare an agent quote with an online quote?

Hold everything constant except the channel. Ask each agent or company for the same coverages and limits and give each the same information, per the NAIC (opens in a new tab). Also match these items:

• Deductibles.
• Endorsements.
• Exclusions.
• Payment schedule.
• Applicant and property information.
• Drivers, vehicles, employees, business activities or other underwriting facts.
• The exact insurer and policy form, where you can.

Two annual premiums that look alike can sit on different limits or deductibles, so the premium alone is not a fair comparison. Get the rate quotes and key details in writing, and ask whether the quote is final or still subject to underwriting.

What can an agent provide besides a quote?

An independent agent can offer several company and coverage choices, and for a small business a broker searches the local insurance market for coverage, according to the NAIC (opens in a new tab). An agent can also help estimate rebuilding cost, explain coverage, point out discounts, give quote information in writing and answer policy questions, per the NAIC homeowners guide (opens in a new tab).

After a loss, you can contact the agent or the company to file a claim, and the insurer stays responsible for handling the claim under the policy. Progressive's independent-agent channel offers guidance, personalized advice, policy options and personal service, in the insurer's own words.

Personal and business coverage can work differently here. Commercial insurance sometimes involves a wholesale or surplus-lines broker, and broker fees are more common, so a business owner should ask early how the placement works and who is paid.

How do you verify licensing and complaints?

A business card does not prove a license. Check with the state insurance department whether the agent and the insurer are licensed, and check complaint information, per the NAIC (opens in a new tab). Every state's insurance department licenses the agents and insurers selling there, and you can find yours through the NAIC's list of state insurance departments (opens in a new tab). For example, the Connecticut Insurance Department's producer licensing page (opens in a new tab) covers producer licensing and continuing-education requirements in that state. Verify the insurer's license the same way.

What should you ask before accepting a quote?

• Do you represent me, one insurer or several, and which insurers can you quote?
• How are you paid, including commission and any contingent compensation?
• Is there any fee, and what are its amount, purpose, timing and refund terms?
• Which exact insurer and policy form does the quote use?
• Do the limits, deductibles, endorsements and exclusions match the other quotes I have?
• Is the quote final or subject to underwriting?
• What are the cancellation terms?
• Who handles servicing, renewals and claims contact?
• Is a producer license on file for you and for the insurer?

Questions people ask about agents and direct buying

Is it better to buy from an agent or online?

It depends on whether you want to self-serve or have someone explain the terms. Online quoting suits shoppers who already know their limits and deductibles, and an agent adds policy explanation, servicing and, for independent agencies, several insurers to compare. Either way, gather quotes on matching terms, since shoppers in the J.D. Power study averaged three to four.

Should I buy directly or through a broker?

A broker generally represents you and may charge a fee, so ask about the fee before the broker starts work. For small-business coverage, a broker can search the local market for you, per the NAIC. Ask the broker how the commission and any fee fit together.

Do insurance agents charge customers directly?

Some agents and brokers charge customer-paid fees in addition to the insurer-paid commission. Whether a fee is allowed and what must be disclosed in writing depend on the law of your state, which your state insurance department (opens in a new tab) can explain. Ask for the amount, purpose, timing and refund terms in writing.

Can an agent help after I buy?

An agent may help with policy questions, servicing, renewals and communication about claims, while the insurer makes the claim decision under the policy. Ask the agency who your contact is after the sale.

How do I check an agent's license?

Use the license lookup run by the insurance department in the agent's state (opens in a new tab). Confirm the insurer is licensed too.

Take your questions to a licensed agency

With your written quotes and the questions above, the next step is to talk with a licensed insurance agency and compare what each one offers on the same terms, as covered in how to choose an insurance agent. Check the agency and the agent with your state insurance department's license lookup (opens in a new tab) before you share personal details, and ask each to put fees and compensation in writing.