Using a broker, consultant, or advisor to find and implement insurance plans for your company is an easy way to save time and money. But many business owners and human resource professionals find it hard to differentiate between a broker, consultant, or advisor when it comes to insurance and employee benefits.
The main differences between an insurance broker and a consultant/advisor are their fee structures and how involved they are with a client beyond insurance purchases and renewals.
Importantly, the broker, consultant, or advisor gets to choose their title – there is no regulatory or licensing distinction. Since a consultant and advisor usually have the same responsibilities to clients, we can generally interchange their definitions.
In this post, we’ll explain the similarities and differences between an insurance broker and an insurance consultant or advisor. Some states also have an Insurance Counselor license which typically applies to Life Insurance advising.
Both brokers and consultants work with multiple insurance companies, so they tend to have broad options for policy offerings and key benefits. However, business insurance consultants and business insurance brokers do have different responsibilities – primarily in the scope of services they offer to employers.
Traditionally, the difference is that a consultant charges a fee for service, while a broker works on commission. Some brokers are paid solely through commissions for policy purchases and renewals, and some include other fees for additional services. Consultants charge fees and sometimes may offset fees directly with commissions if the client chooses to have the insurer pay the consultant versus paying billable hours or fees directly.
The more important distinction between brokers and consultants is a transactional vs. consultative relationship with your business.
An employee benefit broker’s primary focus is helping you buy and renew insurance and benefit products.
The term “broker,” strictly by definition, historically means “shopping for coverage.” They re-evaluate insurance plans/renewals every year and facilitate insurance one year at a time. Meanwhile, “consultant” and “advisor” describe benefits professionals that offer additional strategic or advisory services for their clients.
A business insurance consultant handles procurement and enrollment, but also manages your company’s collective benefits package in ways that improve your overall human resources strategy and other business objectives.
Many modern insurance broker’s services have evolved and work more like consultants/advisors, working with you throughout the year. Thus, the difference isn’t always straight forward. It is always in your best interest to define the relationship and expectations of the services expected.
Business owners and HR managers are focused elsewhere without the time to become experts in insurance policies and employee benefits. For most, using an insurance consultant, advisor or broker will save time and total costs compared to going it alone.
A good consultant will understand coverages and policies as they relate specifically to your business, and will find ways to tailor your coverage, maximizing protection and minimizing cost. To earn their fees, consultants should be involved in your plan several times per year – not just during enrollment and renewals.
Put another way, you should use an insurance consultant when you need ongoing expertise about insurance and benefit options, beyond finding and purchasing a policy. A consultant can bring your company a vision and new ideas that shape a strategic HR plan for the future. This may also include actuarial attestation for specific programs.
A consultant is particularly useful when your company’s operations require specialized expertise.
There are about 413,000 insurance consultants, brokers and associated businesses in the U.S. as of January 2021, according to IBIS World. But how do you find the right one?
When you look for a broker, consultant or advisor, ignore the title. Focus instead on what they do, how well they’ve done it, and how they get paid.
There’s a quick way to find valuable information about brokers in your state. Start your broker search at Mployer Advisor, a free broker marketplace that allows employers to compare brokers, consultants, and advisors in one place, and download our benefits benchmarking report to see how your benefits compare to your competitors.