Shopping for insurance is one of the most important decisions a person has to make. Whether it’s a life insurance or car insurance, the terminologies may sound too technical to understand. A lot of times, the terms insurance agency and insurance carrier are used interchangeable which add up more to the confusion.
What are the Main Differences between Insurance Agency and Insurance Carrier?
Insurance carriers or companies are comprised of multiple insurance agencies. So it’s like an umbrella organization with different segments.
Basically, the insurance company is the main provider of the insurance products while the respective insurance agencies with the agents are the one responsible for the promotion and distribution of varied insurance policies.
However, it’s a common occurrence that one agency can hold or manage different insurance companies or policies. There are basically two types of insurance agencies:
Exclusive Insurance Agency – These are the agencies that sell products or insurance policies exclusive for one company and therefore cannot endorse other insurance products from other brands.
Independent Insurance Agency – This is the exact opposite of an exclusive agency because it is an independent contractor or provider of multiple insurance carriers. It’s a versatile insurance angency so their brand name would usually be very distinct or doesn’t have the name of a particular insurance company.
With a specialty insurance agency, you can purchase different kinds of insurance policies from multiple insurance carriers which provide you the best rates and flexibility in choosing the right match for your insurance needs under one agency.
Insurance Agencies Follow Rate Guidelines and Other Policies as Set by the Insurance Carrier
An insurance agency cannot create policies, set or change insurance rates, or perform underwriting in behalf of any insurance company. They strictly follow the guidelines set any insurance carrier. The parent companies would always have the final say on all matters regarding insurance policies.
Insurance Carriers Set the Premium
Only the insurance companies are able to set premium amounts. This allows a balance between making profit and charging right or in adherence to state laws. It’s aiming for a win-win setup for insurance carriers, agencies, and clients. Insurance agencies can only change premium by adding or removing insurance coverages.
Insurance Policies are Created by the Insurance Carriers
It’s the parent that creates insurance policies. The insurance carrier would determine the inclusions or standards for a particular insurance policy and also sets certain policy definitions.
This details the types of losses that the insurance carrier would cover and what isn’t included. This also details limites on payments for certain losses. Supplementary coverage can be added for additional premiums however the basic policy remains unchanged.
An insurance carrier or company is a small or giant financial organization that provides insurance policies catered to both individuals and corporate institutions. Insurance carriers compute the insurance premiums by looking at the available claim data. Insurance carriers have different insurance products to offer their wide range of clientele.
There are certain discussions or issues going on for over 40 years which aim to eliminate agents and have the insurance companies directly promote and sell insurance policies. However, insurance carriers would really need agents to assess clients and recommend policies that would match their profiles.
Choosing the right insurance package is easier with an insurance agent around to guide you from start to finish. Insurance agencies have mushroomed over the years which show how important it is to both the parent company and clients.