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🏛️ '''Agency''' in the insurance industry refers to a business entity — or the legal relationship it embodies — through which [[Definition:Insurance agent | insurance agents]] represent one or more [[Definition:Insurance carrier | insurance carriers]] to sell, service, and manage [[Definition:Insurance policy | insurance policies]] on behalf of those carriers or their customers. An agency can range from a sole proprietor operating under a single [[Definition:Agent appointment | carrier appointment]] to a large, multi-location operation with hundreds of producers placing business across dozens of markets. The term also carries a legal dimension rooted in [[Definition:Agency law | agency law]]: the agent acts as a representative of the insurer (the principal), and actions taken within the scope of that authority can bind the carrier.

⚙️ Agencies generally fall into two structural categories. A [[Definition:Captive agency | captive agency]] — sometimes called an exclusive agency — represents a single carrier and sells only that insurer's products. An [[Definition:Independent agency | independent agency]], by contrast, holds appointments with multiple carriers and can shop the market to find the best coverage and pricing for clients. Independent agencies may also operate as part of an [[Definition:Agency network | agency network]] or [[Definition:Agency cluster | cluster group]] to gain access to additional carriers, negotiate higher [[Definition:Commission | commission]] rates, and share back-office resources. Revenue typically comes from commissions on new and [[Definition:Renewal | renewal]] business, supplemented by [[Definition:Contingent commission | contingent commissions]] or [[Definition:Profit-sharing agreement | profit-sharing agreements]] tied to [[Definition:Loss ratio (L/R) | loss ratio]] performance.

🌟 The agency model remains the backbone of insurance distribution in the United States, particularly in [[Definition:Personal lines | personal lines]] and [[Definition:Commercial lines | commercial lines]] [[Definition:Property and casualty insurance (P&C) | property and casualty]] markets. Even as [[Definition:Direct-to-consumer (DTC) | direct-to-consumer]] and [[Definition:Insurtech | insurtech]]-driven channels expand, agencies continue to account for the majority of premium volume because of the advisory relationship they maintain with [[Definition:Policyholder | policyholders]]. That relationship carries real economic value — which is why [[Definition:Agency valuation | agency valuation]] and [[Definition:Agency perpetuation | perpetuation planning]] have become critical topics for agency owners approaching retirement or considering a sale to [[Definition:Private equity (PE) | private-equity]]-backed aggregators.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Independent agency]]
* [[Definition:Captive agency]]
* [[Definition:Agent appointment]]
* [[Definition:Agency valuation]]
* [[Definition:Agency perpetuation]]
* [[Definition:Insurance broker]]
{{Div col end}}

Definition:Agency - Revision history

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