What is the Difference Between an Insurance Agent and Producer?

If you work in insurance sales, you may have noticed the terms “insurance agent” and “insurance producer” used interchangeably. What exactly is the difference between the two titles? Do they refer to different roles?

While there are some nuances, insurance agent and insurance producer largely refer to the same occupation. However, understanding the subtle differences can help provide clarity on licensing terminology.

The Origins of “Insurance Agent”

First, let’s look at the more familiar title – insurance agent.

An insurance agent is an individual who sells, solicits, or negotiates insurance policies on behalf of an insurance company. Agents represent the interests of one or more insurance carriers.

Some key responsibilities of insurance agents include:

• Developing relationships with potential clients
• Assessing clients’ insurance needs
• Presenting policy options to clients
• Explaining policy features and benefits
• Calculating quotes
• Completing policy applications
• Collecting payments
• Servicing existing policies

The term “insurance agent” emerged in the early days of the insurance industry. Agents were seen as acting on behalf of insurance carriers to sell policies to consumers.

Today, the role of the insurance agent hasn’t changed much. Agents still primarily represent insurance companies in distribution, sales, and servicing of policies.

The Introduction of “Insurance Producer”

In the early 2000s, the terminology started to shift with the introduction of the term “insurance producer.”

The Producer Licensing Model Act (PLMA) was developed by the National Association of Insurance Commissioners (NAIC) in 1999 and revised in 2002. It provided guidelines for states to update and standardize their producer licensing laws.

A key provision in the PLMA was to define “producer” as encompassing both insurance agents and brokers. Section 3 states:

“A person shall not sell, solicit or negotiate insurance in this state for any class or classes of insurance, unless the person is licensed for that line of authority in accordance with this Act.”

It further defined the terms “sell,” “solicit,” and “negotiate” to cover the activities carried out by both agents and brokers.

The goal was to create a single licensing framework that would cover “producers,” regardless of whether they represented insurers (agents) or consumers (brokers). This allowed states to regulate both roles under the same producer licensing laws.

So “insurance producer” became an umbrella term referring to anyone who sells, solicits, or negotiates insurance products.

How States Regulate Insurance Producers

Today, the vast majority of states have adopted key provisions of the NAIC’s Producer Licensing Model Act into their insurance codes.

As a result, “insurance producer” is now the technical term used by state insurance departments for licensing purposes.

To sell insurance legally, you must be licensed by the state as a producer and receive a producer license. This applies whether you’re acting as an agent or broker.

Some key aspects of how states regulate producers:

• Licensing requirements – Producers must meet the state’s requirements for education, training, and exams to obtain a license. This applies to both agents and brokers.

• Appointment with insurers – Agents who sell insurance products on behalf of insurers must be appointed with those carriers. This formalizes the authorization to act as the insurer’s representative.

• License renewal – Insurance producer licenses need to be renewed periodically, often every 1-2 years. Producers must meet any continuing education requirements to renew.

• Oversight – State insurance departments oversee licensing, complaints, and discipline for insurance producers under their jurisdiction. This regulatory oversight applies equally to both agents and brokers.

So while agents and brokers have different roles, states treat them the same when it comes to producer licensing. Both occupations must be licensed at the state level to operate legally.

The Difference Between Agents and Producers

Given that “insurance producer” is now the technical licensing term used by states, does that make it completely synonymous with insurance agent?

The short answer is: mostly, but not entirely.

While agents and brokers do have to follow the same state licensing process to become producers, there are still some differences between the two occupations:

• Who they represent – Agents act primarily on behalf of insurers, while brokers act primarily on behalf of clients.

• Fiduciary duty – Brokers are generally held to a fiduciary standard and must place clients’ interests first. Agents are typically held to a suitability standard.

• Appointments – Agents must be appointed with insurers to sell insurance on their behalf. Brokers do not require insurer appointments.

• Compensation – Agents are compensated through commissions from insurers. Brokers receive compensation through fees paid by clients.

So while agents and brokers are both considered producers from a licensing standpoint, their roles, duties, and compensation differ.

Can Agents Call Themselves Producers?

This leads to a common question – can insurance agents call themselves producers?

The answer is yes. Since “producer” is the formal licensing term used by states, it is technically accurate for insurance agents to refer to themselves as producers.

However, some considerations:

• In most contexts, “insurance agent” is still more readily understood by consumers than “insurance producer.”

• Using both terms interchangeably can help avoid confusion.

• If required to specify by a state regulator, an agent would need to clarify they are acting in the capacity of an agent, not a broker.

• Agents who only represent one insurer are often referred to as “captive agents” to differentiate from “independent agents.”

So while agents can accurately call themselves producers from a legal licensing perspective, relying solely on the term “producer” without additional context could potentially confuse clients.

Insurance Producer vs. OtherTitles

Beyond agent and broker, there are a few other common insurance titles that “producer” can be contrasted with:

• Agency producer – Some agencies may refer to their employed insurance agents as “agency producers.” This indicates producers who work for an agency rather than solely for a carrier.

• General agent – A general agent has the authority to act on behalf of an insurer for activities like appointing producers or settling claims. They oversee producers and brokerages that have contracted with the insurer.

• Managing general agent (MGA) – An MGA is given significant authority by insurers to manage programs, bind coverage, appoint sub-agents, etc. They take on many insurance company functions.

• Surplus lines broker – These brokers have a separate license to place coverage with surplus lines insurers who are not admitted carriers in the state.

While agency producers, general agents, and MGAs all require insurance producer licenses, their roles go beyond selling, soliciting, or negotiating policies. They have additional delegated insurer or agency responsibilities.

Key Takeaways

• Insurance producer is the official licensing term used by states to regulate the sale of insurance. It covers both agents and brokers.

• Agents primarily represent insurers while brokers primarily represent clients.

• Insurance agents can accurately call themselves producers from a licensing perspective. However, “insurance agent” is still the most common industry title.

• Producers must be licensed by the state and meet requirements like education, exams, and renewals.

• Agents need appointments from carriers to sell insurance on their behalf, which brokers do not require.

• While nuances exist, insurance agent and insurance producer are mostly interchangeable terms referring to the same core occupation – selling insurance policies.

So if you are an insurance agent, feel confident referring to yourself as a licensed insurance producer. Just be aware of any client confusion the title may cause in certain contexts and have clarity on the technical differences between agents and brokers.