Insurance Agencies vs. Insurance Companies: What You Need to Know
When most people talk about buying insurance, whether it’s homeowners insurance, renters insurance, car insurance, health insurance — really, any kind of insurance — it tends to be the insurance companies that get the most attention.
It’s no coincidence, considering how much money is spent each and every year on ad campaigns featuring quirky characters and mascots designed to endear consumers to a particular brand (we’re looking at you, Flo).
But even though you’ve likely seen ads for the same four or five insurance companies, there could be others out there that are a better fit. That’s why, instead of purchasing directly from one company, it can be extremely beneficial to purchase insurance through an independent insurance agency that can help match you with the best possible policy.
Below, we explain the difference between both insurance companies and insurance agencies, the pros and cons of working with each, and answer other common questions. Keep in mind that there could be variations depending on the company or agency you work with.
What is an insurance company?
An insurance company, also called an insurance carrier, is ultimately the business that sells an insurance policy to a customer. It is the insurance company which underwrites the policy, receives monthly premium payments from the customer, and which pays out on any qualified claims.
Some well-known examples of insurance companies that sell both homeowners and auto insurance include Progressive, Nationwide, Allstate, Liberty Mutual, and Travelers, among many others.
What is an insurance agency?
An insurance agent, insurance agency, or insurance brokerage is a company (or individual) who is authorized by an insurance company to sell that company’s policies. Agencies do not themselves originate or underwrite policies, but instead work to connect individuals looking to buy insurance with the companies willing to sell insurance. In exchange for this service, agencies are compensated for any sales that they make.
Of course, not all insurance agencies are exactly the same. There are two primary types of insurance agencies:
- Independent agents, who sell insurance policies and products from a range of insurance companies or carriers
- Exclusive agents, who are only authorized to sell insurance policies of a single insurance company. These agents are also sometimes known as “captive agents.”
Of the two, independent agents tend to offer customers the greatest value. Independent agents typically provide a much wider variety of coverage options than exclusive agents do. This means that they can use their judgement and understanding to pair you with the best possible policy from the best possible insurance company, instead of being limited to only matching you with coverage from a single carrier.
Matic is an example of an insurance agency. Our advisors are not incentivized to sell coverage from any particular insurance carrier, meaning that when you work with us you know that you’re always getting the best policy for your needs.
Working with a company vs. working with an agency: who handles what?
If you purchase insurance through an insurance agency, you will technically be creating two separate relationships: One with the agency that sold you your policy and one with the company that actually underwrites the policy. Each of these parties performs a different role and has different responsibilities.
Generally speaking, you should contact your insurance agent or broker to:
- Purchase a new insurance policy
- Change carriers
- Adjust coverage limits or other plan details
- Talk through questions about your policy
- Understand your coverage
- Understand whether or not you should file a claim
On the other hand, you should contact your insurance company or carrier to:
- Discuss billing
- File a claim
Pros and cons of buying insurance through an agency
The primary drawback of turning to an individual insurance company to buy your insurance is that they will only sell you their own products and policies. This means that even if there is a cheaper or more comprehensive policy out there offered by a competitor, you would never know.
Independent insurance agencies and brokers, on the other hand, offer value specifically because they can cross the aisle in order to find policies from a range of different carriers. Instead of being forced to choose from the limited options offered by a single carrier, this means that you can choose exactly the policy that is right for you — whether you’re looking for more coverage, a lower cost, a specific rider, or anything else.
Insurance agencies offer especially high value for customers who are looking for multiple types of insurance — for example, home and auto. While some agencies specialize in a specific area of insurance, many market themselves as so-called “full service” partners. This puts agencies in an excellent position to mix and match policies to find you the absolute best deals.
As an independent insurance agency, Matic works to connect insurance buyers with the perfect policy for their needs. Matic advisors have no incentive to send you to a specific carrier, and because they are not paid by premium, they also have no incentive to sell you a more expensive policy. Whether you are looking for home, auto, umbrella, flood, earthquake, or any other type of insurance, Matic advisors only have your best interest in mind.