Chapter 11 Flashcards
what is a distribution system?
the method a company uses to make its products available for sale to the public.
What are the 3 types of major distribution systems used by insurance companies?
- personal selling
- third-party-institution distributon systems
- direct response distribution systems.
what are distribution channels?
specific people, institutions, or communication methods that companies use to connect with their customers.
which distribution system accounts for the majority of life insurance and annuity sales and why?
personal selling distribution system
-product with personal knowledge
what term is used to refer to any individual licensed to sell insurance products, solicit sales or negotiate insurance contracts?
producer
what term is commonly used to describe an insurance company’s sales personnel ?
agent. An independent sales representative or company employee who is authorized to act on behalf of an insurance company in selling insurance products.
what is an agency contract
a written agreement that outlines the agent’s role and responsibilities and the agents compensations.
Does the insurer consider the agent to be an Employee?>
the contract will state wheter the agent is an employee or not.
what is an independent contractor?
a person who contracts to do a specific task according to his own methods and who generally is not subject to the employer’s control except as to the end product or final results of the work.
what do you call an independent contractor who works for an insurance company?
independent agents.
What does a typical agency contract contain? (material wise)
- statement of existing contract
- employee status
- description of authority of agent
- description of limitations placed on agent
- listing of insurance agents performance requirements.
- termination provision
- commission schedule, and bonuses
- vesting provisions,
- conditions to revise a commision schedule
- expense provisions
- conditions underwhich agent can submit life insurance applications to another insurance company
what is the term given to retention of business that occurs when an insurnace policy remains in force, as a results of the continued payment of the policies renewal premium?
persistency
What is stated in a termination provision?
- justifiable causew for terminating an agency contract
- length of time required for notice of termination
- obligations of each party after contract termination
which types of agents are sometimes but not always considered employees of an insurer
- career agents
- multiple-line agents
- home service agents
define a career agent
under full-time contract with one insurance company and sell primarily that companys life products
define multiple-line agents
sells life insurance, health insurance, annuities and property-casualty products for one insurance company, with the preponderance of sales being property-casualty products.
define a home service agent
provides policy owner service within a specified geographical area, and often as authorized to collect renewal premiums from customers.
- supervised by district manager
what types of agents are considered affiliated agents and why?
career and multiple-line agents. They sell primarily the procuts of single insurance company
what do you call an insuere’s affiliated agents, as a collective and the offices in which they work out of?
field force in field offices.
what do you call an agent that establishes and finances a field office?
general agent , and the office is then called a general agency.
most life insurance commissions schedules include a first-year and renewal commission. What is first-year commisions?
commision paid to a producer who sells a life insurance policy that is equal to a stated percentage of the amount of premium the insurer receives during the first policy year
most life insurance commissions schedules include a first-year and renewal commission. What is is a renewal commission?
commission paid on polciies every year for a certain number of years after the first policy year. paid to the producer that sold the policy.
what is a service feel, sometimes paid by an insurer?
a small percentage of premiums payable after renewal commissions have ceased.
who typically has a higher commission rate? agents who are not affiliated with one insurance company or affiliated agents?
ones who are not affiliated.
usually because affiliated agents receive some finanical benefits that are not provided to other agents. (benefits, trips, merchandise etc…)
who are required to statisfy minimum sales production and sometimes minimum persistency requirements in order to continue their agency relationship with a particular insurance company?
career agents, multiple-line agents, and some independent agents.
define an agent that is known as a personal producing general agent (PPGA)
an independent agent who receives special consideration for satisfying minimum sales production requirements.
what kind of additional commissions do PPGA receive on the new or renewable business that they sell?
overriding commissions.
What is a broker?
an independent agent who does not have an exclusive contract with any single insurer or specific obligations to sell a single insueres product.
what a producer groups?
organizations of producers that negotiate compensation, products and service affreements with insurance companies.
- serve as intermediaries for independent agents, brokers, PPGAs and insruance companies.
what are the obligations of the head of the insurers’ marketing operations?
- the strategic goals and objectives for agency’s operations are consistent with the insurer’s goals and objectives
- policies are procedures for agency operations are in compliance with all regulatory requirements
- performance standars are in place to measure agency operations
- home officer services are in place to support agency operations.
What are the 5 main subcatergories of home office support for an insurer;s agents?
- recruiting
- licensing
- training
- sales support
- market conduct monitoring
what is the name of the screening test that helps an agency manager determine wheter to actively recuit a job candidate?
Career choice, developed by LIMRA. it uses a questionnaire to get informaiton, and predict the likely success of the candidate.
what is pre-contract training?
Step 2, following career choice
1. its a trial program that permits candidate to become a producer while continuing to work at a current job.
What is learned during the pre-contract training by the candidate?
- the principles of life insurance and annuities
- products and practicies
- sales techniques for insurance products
if they do well, they are given contracts.
When would tupicall financial support end by an insurance company to its producer?
in the 3rd or 4th year
Do all producers have to be licensed?
yes, and in each jurisdiction they plan on doing business
To obtain a license in the US, what must an applicant typically do?
- pay fee
- pass a written examination in each line of insurance he plans to sell
- provide assurance that he is of reputable character.
before an insurance producer begins to solicit insurance product sales on behalf of the insurer, the insurer must do what?
appoint or officially notifyt regulators that it is authorizing a person to sell insurance on its behalf.
who oversees producer licensing to ensure quality standard and appropriate licensing laws?
licensing specialists in an insurer’s home office.
In india, before an applicant can be granted an insurance license they must have what?
- compelted application appropriately
- attained minimum level of education
- completed a required amount of traning in life insurance marketing and sales from an IRDA approved institution
- pass a pre-recruitment examination in life insurance by an IRDA- recognized institution
- paid the required fees to the IRDA
Define business development support
insueres may assist agents by providing them with lead generation support.
insurers may provide agents with contract management software or systems to promote sales lead generations.
Define marketing support
- insurers may use advertising to promote the general quality of their agents,
- they may provude agents with sales promotions material and sale aids
do insurers encourage advertisements created by the producers them selves?
they typically prohibit all advertisements that have not been approved for use by home office.
Define enhances service support
insueres offer enhances service to top performing agents who consistently exceed sale goals.
what are some examples of enhanced service support.
- exclusive direct home office telephone lines.
- extended hours of telephone support
- personal in areas such as u/w, c/s and claims
- advanced underwriting. (for proposals)
what does a producer do for estate planning?
a producer helps a potential client develop a program that will cover the customers current and future financial needs and will provide a means of conserving the personal assets the client wants to pass on.
who is a prospect?
A potential client, in the personal selling distributoin system.
Name 3 types of unfair sales practices.
- churning: where producer induces a customer to replace a life insurance policy with another product multiple times,
- twisting: when a producer misrepresents the features of a policy to induce Internal replacement
- Rebaitng, where the producer offers a prospect an inducement such as cash payemnt to purchase plan.
What is worksite marketing?
a method for distributing insurance products to people at their place or work.
what id location-selling system?
designed to generate customer-initiated sales at an office or information kiosk in a store, shopping mall or other non-insurance business establishment.
What are the advantages to the insurer in a worksite marketing system?
cost effective
serves as a door opener for other products
meets customers needs (low-cost to applicant)
increases insurer’s name and recognition
What are the advantages to the employer in a worksite marketing system?
cost effective
enhances employee good will
is nonintrusive
avoids nondiscrimination requirements
What are the advantages to the employee in a worksite marketing system?
accessible and convenient buying opportunity affordable convenient payments provides easy qualification offers portability flexible
who is a salaried sales representative?
a company employee who is paid a salary for making sales and providing sales support.
What type of insurance sales are typically handled through salaried sales representatives?
group insurance
group annuity
- they promote companies group products to agents, benefits consultants and organizational buyers of group products.
what is a licensed independent financial advisor?
known as registered investment advisor (RIA) is an individual registered with the Securities and Exchange Commisions to give advice about investment securities.
What is a wholesales?
an intermediary appointed by an insurer to promote the insurer’s products to these institutional distributors and to provide these distributors with marketing support.
Who is a broker-dealer
a financial institution that buys and sells securities either for itself or for its customers and provides information and advise to customers regarding the purchase and sale of securities
True or false. In the US securities are sometimes distributed through broker-dealers that are registered with the SEC and are member of the financial industry regulatory authority.
False, they are always disributed this way.
who is the Financial industry regulatory authority? (FINRA)
a non-government self-regulatory organization empowered by the SEC to license, invesitgate and regulate securities dealers and their representatives.
what is an insurance broker-dealer
a registered subsidiary of an insurance company that primarily or exclusively sells that insurer’s variable insurance products and also provides specialized financial planing and investment services.
What is bancassurance?
the distribution of insurance products to bank customers through a bank-affiliated insurer.
define the benefits of bancassurance for insurers, banks and customers.
insurers: access to new market
banks: earned additional income from insurance sales
customers: convenience
Why is bancassurance expected to grow as a distribution channel?
- regulations around world are more conductive to bancassurance
- customers are open to purchasing insurance from banks
- distribution costs are typically lower than for many other channels
what are the 4 primary bancassurance distribution models?
- pure distributor
- strategic alliance
- joint venture
- financial holding company
Which two types of producers are typically used by banks to distribute insurance and annuity products?
platform employees and financial consultants.
define a platform employee
a bank employe who primary function is to han dle customer service issues and sell traditional bank products such as checking and savings accounts but also licensed to sell insurance.
define a financial consultant
Full time bank employee whose primary function is to sell investment products to bank customers.
licensed to sell securities asa well as life insurance and annuities.
what are nonproprietary products?
products developed by another insurance company
what are 4 benefits to insurers who often distribute nonproprietary products?
- offer new product without spending money to develop it
- enter a new market quickly
- decrease risk involved with introducing a new product by experimenting with that product or product life before committing to it
- satisfy producers and cutomers by offering a complete product mix
how do direct response distribution systems connect with their customers?
through distribution channels such as the mail, telephone, or by internet.
What factors are considreed by insueres when making distribution decisions
- costs
- control
- expertise
- customers’ characteristics
- product chracteristics
- external marketing environment
define targeted email marketing
communications emailed to current policyholders or prospective customers designed to elicit a response.
