What is a 'Combination Agency'

Combination agency refers to an insurance dealer that sells more than one class of insurance, or offers other financial services in addition to insurance. An agency can be independent of a particular insurer or dedicated to selling that company's policies.

BREAKING DOWN 'Combination Agency'

A combination agency takes advantage of regulatory developments that emerged in the middle of the 20th century and allowed insurers to issue multiple types of insurance. In the first half of the century, state regulation of insurance companies tended to categorize carriers in one of three major sectors. The first group issued life insurance and annuity products. The second group included casualty and surety insurers, whose policies covered such areas as burglary, equipment, property damage and personal liability. The final category was known as fire and marine insurers, issuing policies on water damage, fire, motor and marine vehicles, among other risk factors. A handful of other highly specialized forms of insurance existed outside of these three sectors.

This classification system was known as the American System, and no such segmentation existed outside of the U.S. The system was designed to protect consumers from insurers entering unfamiliar lines of business without the proper institutional experience, but it created obstacles to new lines of insurance such as medical malpractice coverage. It also did not address problems arising from interstate business activities. In the late 1940s, states slowly abandoned the delineations imposed under the American System and insurance companies evolved toward the huge national and often international multi-line insurers that we know today.

Combination Agencies and One-Stop Shopping

The above history focuses on the development of large companies able to underwrite a wide range of policies under one corporate roof. As this trend toward diversification and multiple product lines continued, local agencies were increasingly able to offer businesses and individuals a similarly broad range of insurance solutions. Commonly, an agency would have specialists handle various policies within one office. This was a powerful marketing tool as the consumer could now resolve more of their insurance needs with one agency, often at a discount offered by the insurer. Insurers have also developed multi-line policies which cover related risks under a single contract, often referred to as an umbrella policy. A common form of multi-line policy combines casualty and property coverage. This move toward bundled policies allowed insurers to capture customers on longer terms than in the past, as it became costlier and less convenient for clients to cancel policies. Both independent insurance brokers and captive agents are able to sell these bundled products.

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