The typical duties of an insurance consultant are to help businesses identify risk and choose appropriate insurance policies to cover potential liabilities. A factory owner, for instance, might hire an insurance consultant to offer advice about the mandatory types of insurance the business must carry, such as workers' compensation coverage, and to offer recommendations for voluntary policies to manage risk.
Conflict of Interest
Insurance agents who work for a company might be able to provide advisory services on par with what an insurance consultant offers. But insurance agents have a conflict of interest if they stand to profit from a business owner’s choices. For example, an agent might make higher commissions on certain insurance products, which might serve as an incentive to recommend those policies over more appropriate or affordable options.
To avoid taking the advice of someone who has a conflict of interest, businesses can hire independent insurance consultants who don't stand to profit from recommending one insurance policy over another. Rather, insurance consultants charge a consulting fee for the advice they give, but don't take a commission or profit in any other way from the policy choices a business owner makes.
In a sense, insurance consultants perform a type of risk assessment. For example, an insurance consultant might visit a business, ask questions about typical practices, analyze workplace safety, identify relevant risks inherent in the industry and then offer targeted recommendations for what insurance policies the business should be carrying. Insurance consultants can also help set the right coverage limits. For instance, a business might not need to pay for $1 million worth of coverage if its entire operation is only valued at $100,000.
Certification and Licensure
Depending on the state, insurance consultants might need to be certified and licensed in accordance with prevailing regulations. This is to prevent just anybody from offering advice about managing risk and investing money in insurance products. Another purpose of the legislation is to prevent insurance consultants from secretly taking commissions from companies for policies they recommend.
State regulations vary, but generally, insurance consultants must be able to demonstrate knowledge commensurate with years of experience in the field, as well as basic knowledge on a variety of insurance and risk-management topics, according to the book “The Insurance Consultant's Handbook,” by Scott Simmonds. Some states require applicants to pass a test to ensure consultants are capable and ethical. If you hope to become a certified insurance consultant, visit your state government’s insurance regulation department to learn about the regulations and minimum qualifications that exist in your region.
Education and Training
There are no standard education and training requirements applicable nationwide. Rather, specific training and education requirements vary by state. Some insurance consultants start training as insurance salespeople, becoming consultants after they’ve gained enough knowledge to fulfill certification requirements by passing a test. In addition, some states require prospective consultants to obtain continuing education. Montana, for instance, requires consultants to complete a 24-credit program at an approved institution.