These terms are often used interchangeably; such use is legally imprecise and technically incorrect. It is true that the same person may perform both roles for the same client, but the differences in loyalties and duties owed require understanding of and the correct use of these terms.
An agent contractually and statutorily represents the insurance carrier as its principal. The law of contract gives the agent the right to represent the insurance company and act on their behalf to solicit and bind coverage. Insurance carriers are usually bound by the actions of their agent provided the agent acts within the bounds of the agency contract. The client is usually unaware of the limits of the agent's authority and relies on the agent's actions. Regardless of how an agent tries to position himself/herself, they must act in the best interest of the insurance carrier (act as a fiduciary) in the placement of coverage, the solicitation of business, and in the settlement of claims.
Conversely a broker represents the insurance buyer as its principal in the negotiation of coverage. A broker cannot bind the insurance carrier to anything, nor do they speak on behalf of the insurance carrier. Brokers can only negotiate and speak on behalf of the insured in the placement of coverage. Brokers are to act in the best interest of the client (the insured) in the placement of coverage and claims settlement.
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