What is the difference between an insurance company and insurance agency?

An insurance company and an insurance agency are two different entities that operate within the insurance industry. Here are some key differences between the two:

• Ownership: An insurance company is owned by shareholders or policyholders, while an insurance agency is typically owned by an individual or a group of individuals.
• Role: An insurance company is responsible for underwriting policies, setting premiums, and paying out claims. It assumes the financial risk of providing insurance coverage to its policyholders. In contrast, an insurance agency acts as a middleman between the insurance company and the policyholder. Its main role is to sell insurance policies to customers on behalf of the insurance company.
• Licensing: An insurance company must be licensed by state insurance departments to operate in a particular state. Insurance agencies, on the other hand, are also required to be licensed, but typically at the individual level, and their license allows them to sell insurance policies on behalf of one or more insurance companies.
• Control over policies: An insurance company has control over the terms and conditions of the policies it underwrites, while an insurance agency has limited control over the policies it sells. The agency can only offer policies and endorsements that are approved by the insurance company they represent.
• Relationship with policyholders: Policyholders have a direct relationship with the insurance company, which is responsible for managing their policies and paying out claims. In contrast, policyholders have a relationship with the insurance agency primarily for purchasing policies and receiving customer service. If a policyholder needs to file a claim, they typically deal directly with the insurance company.

Overall, insurance companies and insurance agencies both play important roles in the insurance industry, but their functions and responsibilities differ significantly.