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This could be a couple of things.
You could be correct and it might be an insect bite. If you suspect this, you can try a little over the counter benadryl every 8-12 hours to combat the swelling.
It could also be a tumor. Tumors can be fatty tumors or they can be something more serious. You don't see as many fatty tumors on the head but it can happen. Fatty tumors do not need to be removed and you will see more as the pet ages if that's what it is.
No matter what, you need to see the vet. The vet will do a fine needle aspiration of the lump and can tell you what you are dealing with. These preliminary tests are not very expensive.
Let me know if you still have questions.
No. These will usually grow and then stop. They don't normally increase in size.