Illinois Casualty Insurance State Practice Exam

What is the primary function of brokering in insurance?

1. Providing insurance to family and friends

2. Offering policies on behalf of an insurance agent

3. Selling policies issued by insurance companies not regularly represented

4. Creating new insurance products

The correct answer is: Selling policies issued by insurance companies not regularly represented

The primary function of brokering in insurance is to sell policies issued by insurance companies that they do not regularly represent. Insurance brokers operate independently and act as intermediaries between clients looking for insurance coverage and various insurance providers. They have access to a wide array of insurance products from multiple companies, which allows them to offer a broader selection of options tailored to the specific needs of their clients. This function is particularly valuable because brokers can help clients navigate the complex insurance marketplace, ensuring they find the best coverage at competitive prices. Unlike agents who typically represent one insurance company and can only offer the products of that company, brokers have the flexibility to source policies from various insurers. This independence enables them to provide objective advice and find coverage solutions that best fit their clients' needs, rather than being limited to a specific set of products from a single carrier. Other options, such as providing insurance to family and friends, offering policies on behalf of an insurance agent, or creating new insurance products, do not capture the core role of an insurance broker and often pertain more closely to other aspects of the insurance industry.