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INSURANCE AGENCY VS
INSURANCE CARRIER?

Insurance carrier, insurance agency – what’s the difference? When you’re trying to buy insurance, it can seem confusing.

There is one, straight-forward difference.

An insurance carrier creates the product (the insurance policy). An insurance agency sells it.

It might help to think of it like this: the insurance carrier is the manufacturer. The insurance agency is the retail store.

But there are a few more differences you should know about.

What’s an insurance carrier?

Also known as an insurance company, or insurer, an insurance carrier:

• Creates insurance policies.
• Decides what the policy will cover (and what it won’t).
• Sets the limit on how much will be paid out if there’s a claim.
• Takes on responsibility for the policyholder’s risk.
• Pays claims.

An insurance carrier can only offer the policies it creates. And is strictly regulated by the government — to make sure they have the funds to cover the risk they take on.

What’s an insurance agency?

Also known as an insurance agent, an insurance agency sells and services policies created by insurance carriers.

To do this, insurance agencies have to get appointed by an insurance carrier. This ‘appointment’ is basically a contract. It lays out which policies the agency can sell, and the amount the carrier will pay them for each policy sold.

Insurance agencies vary in size. Anything from an operation owned and run by a single individual, to a large company with many employees.

But whatever their size: all insurance agents must have a state license to sell policies.

There are two kinds of insurance agencies.

• Captive/exclusive agencies — sell policies only for one insurance carrier.
• Independent agencies – sell policies for multiple insurance carriers.

Captive/exclusive insurance agents:

• Work for one carrier only.
• Can only offer customers policies provided by that carrier.
• Get support from their carrier office, admin staff and customer referrals).
• Earn commission, salary + commission, or salary + commission + bonus.
• Know their carrier’s insurance products inside-out.
• May have to meet certain sales targets, or push particular policies, for their carrier.

Independent insurance agents:

• Work for several different carriers.

• Can offer customers a choice of insurance products from different carriers

• Earn commission only (but typically earn more commission than captive agents.

• Pay their business’s running costs themselves

Confusingly, insurance agencies are often called insurance brokers (or vice versa).

But while independent insurance agents and insurance brokers both sell policies from different carriers, there’s a key difference between them.

What’s the difference between an insurance agent and a broker?

Agents and brokers are both licensed to sell insurance policies. And both are required to comply with state laws and regulations.

The key difference between an insurance agent and an insurance broker is who they work for:

Insurance agents work on behalf of one or more insurance carriers. Insurance brokers work for you.