Insurance industry terminology can be a barrier to entry for anyone getting up to speed. With so many similar terms, knowing the difference between a writing agent, direct writer, policy writing agent, and agent of record – along with where they intersect and overlap – is a daunting feat.
Plenty of industry aficionados still get confused over what anyone means when discussing BGAs; or MGAs and MGUs; or FMOS, IMOs, and NMOs; or insurance agents, brokers, and producers. Today, we’re discussing writing agents and the many other terms that can encompass, and where they fit in the insurance distribution pipeline.
What is a writing agent?
A writing agent is an insurance producer, someone who is licensed to sell insurance. The term frequently appears in legislation when state governments or departments of insurance define what they mean by an insurance agent or a surplus lines broker.
So, when you see the phrase “writing agent” you can understand it to mean an insurance agent, an insurance producer, acting as an agent of an insurance carrier. Writing agents are authorized by the insurance carrier to extend, or “write” policies for coverage to consumers. Keep in mind, not 100 percent of licensed insurance agents, brokers, and producers are in fact writing agents – some producers may solicit coverage or discuss policy options but not have the authority to bind coverage.
This is also where the term “policy writing agent” comes from – it means the same thing as writing agent, both denote insurance producers who are licensed to actively sell insurance.
What is a direct writing agent?
Direct writing agents are insurance producers who work exclusively for a single carrier. In the insurance industry, it’s also quite common to use the term “captive agents” to refer to “direct writing agents.”
Either way, the terms refer to someone who sells the products of only one insurance carrier. This used to be the primary insurance distribution point, where a community would rely on the services of a person employed exclusively by a single insurance carrier. However, nowadays, it’s far more common to work with independent insurance agents, who can contract with multiple insurance carriers.
Direct writing agents, or captive insurance agents, are more likely to have assistance (or even directives) from their parent carrier for things like compliance, staffing, prospecting for new clients, and the ticky-tacky business decisions like office space and branding. Many insurance producers start as captives in order to get going in the business before they transition to independent roles and branch out to start their own insurance firms.
Independent agents, because they have access to a wider variety of products, can often help research different price points or contract variables, while direct writing agents are, by definition, more limited in their scope to a single company’s products. However, direct writing agents may then have a more favorable contract structure or a deeper knowledge of their parent company’s policies and how to secure coverage.
It’s also worth noting that, when insurance carriers cut out the middleman entirely and sell straight to consumers, the insurance carrier is itself acting as a “direct agent” or “direct writing agent” in this capacity. So, if you come across the terms, they could mean a captive agent working on behalf of an insurance carrier or they could refer to direct-to-consumer sales channels like online enrollment.
What is an agent of record?
An agent of record – also known as broker of record (BOR) – is the person who bound the coverage for a consumer. Their name is listed on the contract, and they are obligated to some degree of “servicing” after the contract, meaning a contract holder should be able to contact them with questions or clarifications about coverage and what their policy terms are.
Insurance carriers often pay a large upfront commission to the writing agent and then continue to pay a service fee, or service commission, to that agent as long as they are the agent of record on a contract. So, as long as an insurance producer is acting as an agent of record, they are typically entitled to some nominal compensation from the carrier. However, if a client ends up feeling as though their agent of record isn’t providing service – if the agent retires or ghosts their calls – a client can also petition an insurance carrier to replace their agent of record.
This concept also applies to “brokers of record.” The term “broker” could refer either to an insurance producer who is acting exclusively on behalf of a consumer – meaning they likely don’t have an appointment with a carrier – or it can refer to surplus lines brokers, who are licensed insurance agents authorized to sell surplus lines coverage. Or, if an agency repeatedly refers to a BOR but only works with agents or producers, the agency may be using “broker of record” to just be synonymous with “agent of record” (despite the fact that “broker” and “agent” actually have distinct meanings).
However, as we’ve discussed before, the variations of state regulations when it comes to broker roles get too complicated to declare any blanket statements for what a broker rule means. In some states, a broker still has to have an appointment. In others, a broker is a licensed insurance producer who doesn’t hold an appointment. Some states require the insurance broker to place coverage through an insurance agent counterpart who is appointed with the carrier.
Variations in insurance terminology are the best
Overall, though, we don’t blame you if you’re thinking “Agent? Producer? Broker? Writing agent? Direct somethings? Captive whatnow? Agent of record? Why so many terms?” This is a really, really reasonable reaction to getting into the terminology of insurance.
The reality of America’s 50-state approach to insurance is that each state serves as its own microcosm of insurance, often with its own regional lexicography. While insurance producer licensing and regulation have gotten far easier over the decades thanks to Congressional pressure, there can still be a lot of variance between how carriers, agencies, and members of the distribution chain talk about the functions of insurance and how regulators in each separate insurance jurisdiction talk about them.
If you’re still working on developing your insurance lexicon, check out more of our Insurance 101 content. But if you’re trying to help your business navigate 50-states-plus-territories-worth of insurance regulations, schedule a demo today and see what AgentSync can do to help.