When shopping for insurance you’ll likely come across two terms: Insurance agency and insurance carrier. While there are some similarities, working with an agency vs. a carrier comes with nuances and pros and cons that you should consider. Read on to learn more.
WHAT IS AN INSURANCE AGENCY?
An insurance agency is an intermediary entity that connects people looking for insurance coverage with insurance providers. Essentially acting as a middleman, an insurance agency facilitates the purchase of insurance policies and can:
- Advocate for policyholders.
- Provide guidance and advice, explain policy details, assist in assessing coverage needs, and offer recommendations.
- Compare policies from different carriers.
- Help with the claims process.
Insurance agencies can be independent, offering policies from multiple carriers and providing a range of options, or they may be captive agents representing only one insurance carrier.
WHAT IS AN INSURANCE CARRIER?
An insurance carrier, often referred to simply as a "carrier" or "insurer," is an entity that assumes the financial risk and responsibility for providing insurance coverage. These companies:
- Evaluate risks associated with potential policyholders (underwriting).
- Create insurance policies and determine terms and conditions, coverage limits, and exclusions.
- Set premiums. Issue the policy to the policyholder.
- Process claims for covered losses or events.
They also assume the financial risk associated with providing coverage, including potential payouts for covered claims and other financial obligations.
KEY DIFFERENCES BETWEEN INSURANCE AGENCY AND INSURANCE CARRIER
|Who They Represent
You, the policyholder. They advocate for your needs and help you find the best coverage at the most competitive rates.
Themselves. They design the policies, set terms and conditions, and assume the financial responsibility for covering the risks.
|Role in Insurance Process
Guide you through the insurance process, help you choose the right coverage based on your needs; can also provide claims assistance, acting as a liaison between you and the carrier.
|Assess risks, create policies, set terms and conditions, set premiums, manage claims.
|May operate independently, offering policies from multiple carriers, or may offer policies from one carrier.
|Offer policies from its own portfolio, limiting clients to the carrier’s specific coverage options.
|Provides personalized, consultative experience; builds relationships with clients.
|Not always the primary point of contact but are involved in critical interactions such as claims processing.
|Representation of Interests
|Represents interests of policyholders.
|Represents interest of itself while also fulfilling contractual obligations to policyholders.
WHICH SHOULD I CHOOSE?
Understanding the roles of insurance agencies and insurance carriers is crucial for making informed decisions about your coverage. Choosing an insurance agency means gaining a personalized, consultative experience. You have a dedicated professional guiding you through the process, explaining complex terms and ensuring your coverage aligns with your needs.
Additionally, insurance agencies may offer a greater variety of options from different carriers, allowing you to compare policies, coverage limits, and premiums to help you find the best fit. Choosing a carrier means committing to their in-house policies. This can simplify the process but may limit your exposure to a broader range of options.
Whether to work with an insurance carrier or insurance agency depends on your preferences, the level of personalized service you desire, and your comfort with direct interactions. Compare the pros and cons of both to choose the one that’s right for you.