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Insurance Marketing Systems

Most Insurers use one or more of the following traditional marketing systems: -


· Independent Agency System

· Exclusive Agency System

· Direct writing System

· Direct Response System

Independent Agency System An independent agency is an independent firm that sells insurance usually as a representative of several unrelated insurance companies. As an exception to the foregoing, some independent agents agree to place all or most of their business with one insurance company.

Independent Agent is a producer who works for an independent agency.

One of the main distinguished features between independent agency system and other marketing systems ownership of the agency expiration list which is the record of present policy holders, the dates that policies expire (owning the expiration means, the agency expiration list of an independent agency belongs to the agency and gives the agency the right to solicit those policy holder for insurance).

Brokers An insurance broker is an independent business owner or firm that represents customers rather than insurers. Brokers shop among insurance companies to find the best coverage or value for their clients. The Brokers are not legal representatives of the Insurer, or not likely to have authority to commit the insurer by binding coverages unlike agents who generally have binding authority.

Managing General Agencies (MGAs)

A Managing General Agency is an independent business organization that appoints and supervises independent agents for insurance companies that use the independent agency system. The MGA functions almost as a branch office for one or more insurance companies. They receive managerial commission often referred as override, which is the percentage of premium or the profits on policies, sold by producers placing business with the insurance company through the MGA.

Exclusive Agency System

An Exclusive agent is an agent that has a contract to sell insurance exclusively for one insurance company or a group of related companies. Usually, the agency contract entered into between the Insurer and the agent contains an agreement that, upon termination of agency contract the insurance company will by the expiration list from the exclusive agent. But in certain cases, an exclusive agent owns the list and has a right to sell it to another party also.

Direct Writing System

The direct writing system of an insurance marketing uses sales representatives who are employees of the insurance company.

A direct writer is an insurer that uses the direct writing system to market insurance. Such sales representatives are paid commission as well as office expenses. In this system, expiration does not belong to the sales representative and is exactly owned by the insurance company only.

Direct Response System

A direct response system includes any insurance marketing system that does not depend primarily on individual producers to locate customers and sell insurance but relays primarily on mail, phone and internet sales.

Mixed Marketing System
This is a system which refers to the use by the insurer of more than one marketing system.


CHAPTER 4 - MARKETING

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