1. Distribution Systems Insurance Market Intermediaries
Unique characteristics of insurance marketing
Legal status of agent
Agent - represents insurer
Broker - represents policyholder
Powers and duties of agent
Listed in contract
Powers - Lines written, binding authority
Duties - Accounting, rules
Apparent versus actual authority

2. Attributes of Insurance Intermediaries
Ties to insurers
Compensation methods
Salary
Commissions
Flat
Contingent commissions
Ownership of expirations

3. Types of Insurance Distribution Systems
Independent Agency System
Agents own expirations
Exclusive Agency System
Direct Writer
Direct Response
Combination Systems
INA s
Allstate - currently
Expense differences

4. Alternative Marketing Systems
Involuntary Market
Auto
Assigned Risk Plans
Joint Underwriting Associations (JUAs)
Auto Reinsurance Plans
State Funds
Property
FAIR Plans
Beach and Windstorm Plans
Workers’ Compensation

5. Alternative Marketing Systems
Governmental Insurance
State insurance funds
WC -25 states
Auto - Maryland
Federal
Flood
Crime insurance
FAIR plans
Insurance exchanges
Illinois - surplus lines
Risk Retention Groups
Need approval only in one state
1981 Product Liability
1986 Commercial
Liability (except WC)
Purchasing Groups
Exempt from Fictitious Group laws
Mass merchandising

6. Marketing Management and Agent Functions
Branch Office System
Managing General Agency System
Independent business
Performs branch office functions
Appoints agents
Primarily excess and surplus lines and specialty areas
Functions Performed by Agents
Prospecting
Sales
Risk analysis
Policy issuance
Collection
Claims handling
Consulting

7. Distribution System Decisions
Geographic location
Expertise and reputation of producers
Nature of existing business
Ability to service products
Markets to be targeted
Insurer characteristics
Degree of control required or desired

8. Comparison of Distribution Systems
Independent Agency System ~ 51% of P-L market
Higher in commercial lines
Lower in personal lines
Slower growth rate
Higher expense ratios
Examples of successful exclusive agency insurers
State Farm
Allstate