What Does an Insurance Agency Do?
An insurance agency is a business that represents various insurance companies and provides clients with advice and information on the policies that they carry. These agencies can be either captive or independent and often specialize in a particular area of coverage, such as home, auto or business.
Captive agents, such as agents that represent Farmers Insurance or State Farm, only sell products from a single insurer and usually don’t provide the same level of service to customers that an independent agent would offer. Insurers pay their agents a commission for the sale of policies, based on the premiums they collect from their customers.
They also receive commissions based on the frequency of payments made by their customers, whether they pay monthly, quarterly or semi-annually. Contingent commissions are also paid when a policy is renewed.
The commissions that an insurance agency earns vary depending on the type of coverage and the size of the customer’s premium. The base commission is generally a percentage of the total premium charged, while supplemental or contingent commissions may be higher or lower.
Some agents also offer a combination of services to their customers, such as enrollment and claims assistance. They are also responsible for developing relationships with their customers, which are the basis of their business and the foundation of their reputation.
A good insurance agent must understand their customers’ needs and how to match them with the coverage they need. They must be willing to spend time with their customers, educating them on the different types of policies and helping them find the coverage that best meets their unique situation.
These agents develop long-term client relationships through referrals, cold calling, email marketing and other methods of generating business. They must be able to maintain these relationships and stay in touch with their clients when they need to file a claim or increase their insurance coverage due to a major life event, such as the birth of a child.
They must also be able to provide the same level of service to each client, no matter the size of the policy or how complex the customer’s circumstances are. They must be willing to work with their customers and their insurers to help them meet their goals, such as getting a homeowner’s policy or a small business policy for a new company.
Insurers must be able to pay claims in the event of an accident, theft or natural disaster, and they must have the financial resources to pay out these claims and to cover other losses. They are regulated by the federal government to ensure that they can fulfill their fiduciary obligations to their policyholders.
An insurance agency can be a lucrative career option for those with the drive and the right qualifications. Although they require significant capital up front to establish their practice, the long-term return on investment can be substantial.
An insurance agency can be a great way to earn a comfortable living while serving the interests of your customers and earning a commission on the policies you sell. However, this business model requires extensive commitment and time, so it’s important to make sure you have the necessary skills, training and experience before deciding to pursue an insurance agency career.