Texas General Lines — Property and CasualtyGeneral InsuranceEasy
A self-employed insurance agent works independently, represents multiple insurance companies, and earns commissions from policies sold. This agent does not have exclusive contracts with any single insurer and owns the expirations of the policies. What type of marketing distribution system does this agent primarily utilize?
- ADirect response system
- BExclusive agency system
- CIndependent agency system
- DBrokerage system
Show answer & explanationAnswer & explanation
Correct answer: C. Independent agency system
The independent agency system is characterized by agents who represent multiple insurers, are independent contractors, and typically own the expirations of their policies (meaning they control renewal business). This matches the description of the agent in the scenario.
Why the other options are wrong
- A. Direct response systems involve selling insurance directly to customers without an agent.
- B. Exclusive (or captive) agents represent only one insurer and do not own expirations.
- D. While a broker also represents the insured, the key characteristics of owning expirations and representing multiple companies are hallmarks of the independent agency system, which a broker may operate within.
Independent Agency System
A marketing and distribution system where agents are independent contractors, represent multiple insurers, and own the expirations (renewal rights) of their policies.
- Agents are independent business owners.
- Represent several unrelated insurers.
- Own the expirations of the policies they sell.
- Compensated by commissions.
Memory trick: Distribution channels: How insurance reaches the people.