Insurance Carrier Vs. Insurance Agency: The Best For You
Many customers and even some budding insurance agents can get confused when it comes to the difference between an insurance carrier and an insurance agency. At times the roles they play in the insurance industry make the distinction between the two difficult.
While it’s understandable that customers would be confused about the differences, as an insurance agent you must know what they are from the get-go. Knowing the difference can help you figure out your path within the insurance industry.
To put it simply, there is one to-the-point difference between the two. An insurance carrier prepares the insurance policy, whereas an insurance agency sells it.
With this in mind, let’s look at each of them individually.
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An insurance carrier is also known as an insurance company or an insurer. A carrier creates the policies and insurance products. It controls the claims payout, policy pricing, underwriting, and the direction of the company. While a carrier can sell directly to clients through its captive agents, it is only able to offer the policies that it creates.
Insurance Information Institute reports that by 2019, there were 5,965 insurance carriers in the country. State governments strictly regulate insurance carriers to make sure that they have sufficient funds to cover the risks they are insuring.
A carrier oversees the following things:
- Deciding the coverage details of the policy
- Setting claim limits
- Determining premium payments
Ultimately, the carrier is the one that takes on the risk of the insured.
Carriers can be classified into two types: mutual and proprietary. The shareholders of the carrier own a proprietary company. Whereas, the policyholders completely own a mutual company.
An insurance agency sells insurance policies that are created by an insurance carrier. Carriers appoint agencies on the basis of a contract. This contract clarifies which policies the agencies can sell and the carrier’s amount for each policy sold.
There are two types of agencies: captive and independent. Captive agencies are run by captive agents who are employed by the carrier. They can only sell policies from the carrier—think State Farm, Allstate, Geico, etc.
On the other hand, agencies run by independent agents‘ contracts with multiple carriers. They can decide which carriers they wish to represent and which products they would like to sell. This gives them the freedom to work with a variety of insurance companies and give their clients multiple options.
The following are some of the responsibilities of an insurance agency:
- Sell various insurance policies and products.
- Help the client inventory their assets like their cars or property like jewelry and artwork.
- Conduct risk assessments of new clients.
- Promote insurance products to new and existing customers.
- Prepare quotes for clients.
- Bind coverage for clients after they have selected and paid for a policy.
Which is Better for You?
According to the U.S. Bureau of Labor Statistics, the insurance industry employs an estimated 2.8 million people as of 2021. Deciding to work for an insurance carrier or an independent insurance agency can pose a dilemma for budding agents. And given the flexibility offered by the industry, it can get confusing at times as well.
With an insurance carrier, an individual will have more opportunities to pursue underwriting, risk assessment, and insurance policy creation along with selling insurance. Moreover, if you choose to become a captive agent, you will be trained in the carrier’s products and policies. Many people choose to become captive agents because they are typically salaried positions with benefits. Working for a carrier provides an opportunity for progressing towards the corporate sector within the insurance industry.
When you choose to work for an independent insurance agency, you are primarily focusing on selling insurance to people who need it. With this line of work, you will need to have knowledge regarding claims procedures, risk management, and be well-versed in the details of the policies and insurance products you sell. By working for an agency as an independent agent, you can work the way you want while you get first-hand experience of how the insurance industry works. Moreover, you have the potential to make more money than a captive agent due to more favorable commission rates with the carriers.
What Should Your Choice Be? An Insurance Carrier or Insurance Agency?
As for which career path to choose, that is up to the individual. For every agent who wants to work a certain way, there is another who wishes to work in a differently. Some prefer to go captive and have a stable income and get a footing in the insurance industry. Others want to blaze a trail for themselves and work independently. Thus, your decision to work for an insurance carrier or an agency depends on what you want to do and where you want to advance.
Of course, agents are free to move between the two. You can work for a carrier at first and then move towards an independent agency or vice versa. The choice is up to you, your skills, and what you are comfortable with. In any case, the opportunities in insurance careers that they both provide are quite interesting.
What are your experiences in the insurance industry? Feel free to share your know-how about your career in insurance.
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