California Life-Only & Accident and Health AgentGeneral InsuranceEasy
An insurance company uses independent agents who represent several different insurers and are paid commissions on the policies they sell. This describes which type of marketing distribution system?
- AIndependent Agency System
- BDirect Writing System
- CCareer Agency System
- DExclusive Agency System
Show answer & explanationAnswer & explanation
Correct answer: A. Independent Agency System
The independent agency system is characterized by agents who represent multiple insurance companies and are independent contractors. They own their client accounts and are compensated by commissions.
Why the other options are wrong
- B. A direct writing system uses employees of the insurer to sell policies, not independent agents.
- C. A career agency system is a type of exclusive agency system focusing on recruiting and training new agents.
- D. An exclusive agency system uses agents who represent only one insurer.
Independent Agency System
An independent agency system uses agents who are independent contractors, represent multiple insurers, and own the expirations (client accounts) of the policies they sell.
- Agents represent several insurance companies.
- Agents are independent contractors.
- Agents own their client accounts (expirations).
- Compensated primarily by commissions.
Memory trick: Distribution is Direct, Exclusive, or Independent – 'DEI' for Delivering Every Insurance.