What is Alphabet Broker
Alphabet broker is slang terminology for the large, predominantly U.S.-based national insurance brokerage firms that are sometimes referred to by the initials that are derived from their legal names. One example would be Teachers Insurance and Annuity Association, which is much better known by its acronym, TIAA. An alphabet broker is also sometimes referred to as an alphabet house.
BREAKING DOWN Alphabet Broker
Alphabet broker is a slang expression that is used in the insurance brokerage industry to represent a number of large old-school insurance brokers and consultants that are more commonly referred to by their initials rather than their full names. For example, it is likely than many more individuals are familiar with the name AIG than with the company’s full name, American Insurance Group.
Although the term alphabet broker is still used in the industry today in reference to large fee-based consultants and insurance brokers, most of the companies that created the idiom have since gone out of business or have been bought by other large firms. Sometimes, while trying to solicit new customers, smaller competitors will use the expression alphabet broker or alphabet house derisively in an effort to portray them as impersonal, faceless corporate behemoths.
Another term that is correlated to both alphabet broker and alphabet house is alphabet house organization, which has been used to describe a large insurance intermediary firm with offices around the world.
What Is an Insurance Broker?
Insurance brokers sell all types of insurance policies, including homeowners, business, health, life and automobile policies. They may work independently, or they may be employed by an insurance brokerage firm. Insurance brokers may work with individual customers or with businesses that have assets they wish to protect. Insurance brokers help their clients select insurance products and also advise them on how to mitigate risks and lower insurance costs. In the event of a claim, they also work on the client’s behalf with the insurance company to get the most favorable settlement for the client.
Investment Side of Insurance Brokerage Firms
In addition to insuring against hazards, many insurance companies also sell investments or investment-like products. The most prevalent investment products offered by insurers are annuities and life insurance policies that also feature investment elements. A number of insurance companies operate brokerage arms that trade securities on behalf of clients. The insurance industry is regulated primarily by state insurance commissioners, though their broker-dealer subsidiaries are also regulated by the Securities and Exchange Commission, National Association of Securities Dealers and state securities administrators.