An agency is an entity that performs actions on behalf of another party known as the principal. In the context of insurance, insurance agencies sell policies on behalf of insurance carriers. The former has permission to find customers and write policies. For this service, the agency receives a fee from the carrier.
Agencies essentially act as middlemen between insurance companies and potential customers. They benefit both the insurance company and potential customers due to their specialization in finding potential customers policies that best fit their needs. Thus, they bring in business for the insurers and simultaneously provide a useful service for customers. Typically, insurance agencies have the authority to sell policies for a number of different carriers, not just one.
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