What Is the Difference Between an Insurance Agency and a Carrier?

What Is the Difference Between an Insurance Agency and a Carrier?

In the insurance realm, terminology can be confusing. When dealing with workers’ compensation, should you contact an insurance agency or a workers’ compensation carrier directly? To make informed decisions, it’s essential to understand the distinction between the two.

What Is an Insurance Agency?

The terms “insurance agency” and “insurance carrier” are often used interchangeably but have distinct meanings. A workers’ compensation insurance agency, also known as a brokerage, is tasked with distributing and selling appropriate insurance to businesses or individuals. Their responsibilities include providing services, answering inquiries, and assisting in selecting suitable plans.

Agencies may either work exclusively for a specific workers’ compensation insurance carrier or operate independently, offering work comp insurance plans from various carriers.

What Is an Insurance Carrier?

In the case of American Liberty, it is a workers’ compensation carrier, not an insurance agency. Insurance carriers, commonly referred to as insurance companies, hold and manage the insurance policies that agencies distribute to businesses and individuals. In simpler terms, carriers formulate the insurance policies that agents present.

Understanding the Main Differences Between the Two Consider this analogy: An insurance agency is akin to a retail “shop,” while the insurance carrier is the manufacturer of the products displayed on the shelves. Key differences between the two entities include:

Responsibility: Carriers manage claims, pricing, and overall insurance policy management. Agencies are responsible for selling products and assisting policyholders with inquiries and concerns.

Premium Collection: Insurance agencies do not handle premium collections on behalf of the carrier. Instead, the workers’ compensation carrier collects the necessary premiums as stipulated by your plan.

Policy Changes: The initiation and approval of any policy changes rest with the insurance carrier, not the agency.

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