1.5 Insurer Management and Distribution

Question 1

Management (Types)

Answer 1

Executives; Actuarial Department; Underwriting Department; Marketing/Sales Department; Claims Department

Question 2

Executive (Management)

Answer 2

Oversee the operation of the business

Question 3

Actuarial Department (Management)

Answer 3

Gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates.

Question 4

Underwriting Department (Management)

Answer 4

Responsible for the selection of risks (persons or property) to insure and rating that determines policy premiums

Question 5

Marketing/Sales Department (Management)

Answer 5

Responsible for advertising and selling

Question 6

Claims Department (Management)

Answer 6

Assists the policyholder, insured, or beneficiary in the event of a loss and processes, and pays the amount of the claim in a timely manner, based upon the contractual provisions and the amount insured.

Question 7

Distrubtion Models

Answer 7

Exclusive or Captive Agency System; Direct Writing System; Independent Agency; Career Agency System; Personal Producing General Agent; Direct Mail or Direct Response Company; Mass Marketing

Question 8

Exclusive or Captive Agency System (Distribution Model)

Answer 8

The insured interacts with the insurer through an exclusive or captive agent, representing only one company, or a group of companies that have common ownership. The insurer retains ownership rights to the business written by the agent and may or may not provide the agent with office and agency support services. The agent is an employee or a commissioned independent contractor.

Question 9

Direct Writing System (Distrubtion Models)

Answer 9

A producer or agent is an employee of the insurer, and the insurer owns the accounts. The agent may be paid a salary, salary and a bonus, or commission.

Question 10

Independent Agency (Distribution Models)

Answer 10

An agent or agency enters into selling agreements with more than 1 insurer; an unlimited number of insurers may be represented. The agency retains ownership of the business written. The independent contractors are paid a commission and must cover the cost of agency operations.

Question 11

Career Agency System (Distribution Models)

Answer 11

Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company

Question 12

Personal Producing General Agent (Distribution Models)

Answer 12

The agent sells insurance for carriers it is contracted with and maintains its own office and staff. These agents do not recruit career agents.

Question 13

Direct Mail or Direct Response Company (Distribution Models)

Answer 13

Insurers sell insurance policies directly to the public via licensed employees or contractors. They use a marketing system that utilizes mass media, such as direct mail, newspapers, magazines, radio, television, internet, web sites, call centers, and vending machines.

Question 14

Mass Marketing (Distribution Models)

Answer 14

This type of marketing uses the direct response or direct mail method to target a specific type of insurance to a large group of individuals, such as the American Association of Retired People (AARP). The insurer may benefit through reductions in marketing costs and underwriting expenses may be lower when coverage is offered to a limited population. Associations may receive some financial benefit from allowing an insurer to market directly to its membership.