What Does Insurance Producer Mean?
An insurance producer is someone who has the proper licensing to sell insurance within a particular state or province and is responsible for the sale of insurance products on behalf of insurance companies. Because of this, they must possess a significant amount of knowledge in their particular insurance subfield. For example, an agent may specialize in personal auto insurance or commercial farm insurance.
Insurance producers often are not actual employees of insurance companies (with the exception of captive agents). Instead, they work on a commission basis and sell insurance for multiple insurers. The commission agreement depends on the contract the producer has with the insurance company and may depend on the type of insurance they are selling. For example, an insurance company may give the insurance producer 20% of the premium for the sale of a home insurance policy and 10% for an auto policy.
Insurance producers are responsible for activities such as:
- Establishing payment methods for insurance premiums
- Claims reporting
- Liaising with claims agents
- Updating policy information each year
- Maintaining a positive business relationship between the client and insurance company
The term “insurance producer” is interchangeable with independent agent, captive agent, insurance representative or insurance broker.
Insuranceopedia Explains Insurance Producer
To become an insurance producer, a person must complete the necessary training, pass relevant exams and obtain a license. After they have done all that, they will be authorized to sell insurance products on behalf of insurance companies. Licenses for insurance producers must be renewed periodically. Continuing education and refresher courses as well as a nominal license fee may be required to renew the license each year.
Insurance producers can hold licenses in the state/province in which they live — this is called a resident agent or statutory agent — or in other states/provinces. Each state/province has its own set of regulatory rules to maintain an active license.
In addition to the regulatory education credits required to uphold their license, insurance producers must also adhere to a strict code of conduct. This code of conduct outlines the insurance producer’s responsibility as a fiduciary.
A fiduciary is a person or organization that acts on behalf of another person. The insurance producer acts on behalf of the insurance company by selling their products, and at the same time, acts on behalf of the client by protecting their financial well-being through the sale of insurance. A fiduciary must always put their client’s interest ahead of their own. For example, an insurance producer must not sell insurance simply because it will make them a good commission — the sale first and foremost must benefit the client.
This code of conduct also notes that producers must be trustworthy, honest and have a commitment to the integrity of the insurance industry as a whole. They must sell and maintain policies that are beneficial to the client and also the insurance company. For example, if an insurance producer has information that leads them to suspect a client may make a fraudulent claim, they must deny the client the sale of the insurance policy. While the insurance producer acts as the intermediary between client and insurance company, they are responsible for maintaining the financial wellbeing of both parties during the period of the insurance contract.