Insurance Glossary: The Difference Between An Insurance Agency & An Insurance Carrier

Are you among those who use these terms interchangeably? Perhaps it’s time you learnt to differentiate them.

Today, very few individuals or businesses have adequate money or financial reserves to guard themselves against the various liability and property exposures that most people face.

Insurance helps deal with the economic damage from loss -whether it’s a wrecked car or home on fire. Without insurance, loses and risks typically become more harmful.

If you’re curious about the distinction between an insurance carrier and agency, this guide will prove invaluable.

Definitions of Insurance Carrier and Agency

An insurance carrier is a company that typically sells policies it owns. Such companies include Allstate and Geico.

An agency on the other hand, typically represents various insurance companies. Specifically, agencies sell products that meet their client’s needs.

The downside of carriers is that if you wish to compare prices and policies, it takes considerable time to call each company, wait on the line, and locate a representative who’s knowledgeable enough to clarify complex options.

Conversely, an agency collaborates with you to meet your personal insurance needs, and contacts various companies according to your needs.

Roles of Insurance Carrier vs. Agency

An insurance agency represents numerous companies, so it has options for its clients. Agencies don’t develop claims procedures, set pricing, or underwriting guidelines.

On the other hand, every carrier establishes its own rules and rates for conducting business with them. When you conduct business with direct writers such as Allstate, you’re conducting business with that particular insurance company.

Insurance carriers can only offer you what they sell unlike independent agencies, which shop the market on your behalf while ensuring you obtain the best coverage at the best cost.

The Insurance Industry in the United States

The insurance industry in the U.S. is the largest worldwide in terms of revenue. Since 2011, the industry’s annual revenue, termed insurance premiums, surpassed the $1.2 trillion mark.

Research further reveals that premiums have increased at a modest rate following a dip in 2009 because of the fiscal crisis. Insurance companies play an important role in the economic services sector in this country.

According to Market Realist, this industry contributes almost 40% GDP of the monetary institutions and employs over 2 million people.

Statistics on Insurance Industry in the United States

Here are some interesting statistics provided by Insurance Information Institute:

• In 2013, the industry’s net premiums totaled $1 trillion with Health/Life insurers accounting for 54%  while Property/Casualty (P/C) insurers accounted for 46%
• In 2013 there were 6,086 insurance companies, P/C (2623 companies), health (835), life/annuities (904) fraternal (87), life/annuities (904), risk retention groups (256), title (58), and other companies (1,323) according to the National Association of Insurance Commissioners.
• In 2013, insurance carriers and associated activities accounted for $421.4 billion or 2.5% of U.S. GDP according to the U.S. Bureau of Economic Analysis.
• In 2014, the industry hired 2.5 million, according to the U.S. Department of Labor. Of these, 1.5 million worked for insurance carriers, including health, life, and medical insurers (838,200) workers, reinsurers (25,200), P/C insurers (596,000 workers) while the remaining 1 million worked for brokers, agencies, and other insurance-related companies.

Different Types of Insurance Offered in the United States

Auto Insurance

The term describes a policy bought by car owners to mitigate expenditures related to an auto accident. Instead of paying out of your pocket for vehicle accidents, you simply pay yearly premiums to a vehicle insurance company.

Statistics on Auto Insurance in the United States

The average auto indemnity expenses increased from $798 in 2011 to $ 815 in 2012. This is according to a 2014 report. Over the subsequent 5 years to 2020, it’s predicted that the industry will increase alongside constant enhancements in the macroeconomic landscape.

Business Insurance

You can access insurance coverage  from various companies, including AC Insurance Services for all conceivable risks your business might experience. The coverage amount and cost of policies differ among insurers, so it’s important you discuss your specific risks and the kinds of available insurance with your broker or agent.

In conclusion, the insurance industry in the United States has evolved over the years, resulting in a wide range of services and products. If you’re wondering whether you can find a plan that meets your needs, don’t worry. There’s something for everyone.

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