1.5 Marketing Systems and Producer Authority

Achievable Casualty

1. General Insurance Concepts

Marketing Systems and Producer Authority

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Marketing systems

Producers may function as agents, representing the insurance company, or as brokers, representing the potential insured.

Agency system

A Managing General Agent (MGA) is an individual or business entity appointed by an underwriting insurer to solicit applications from agents for insurance contracts or to negotiate insurance contracts on behalf of an insurer and, if authorized to do so by an insurer, to effectuate and countersign insurance contracts.

In general, property and casualty insurance agents represent the insurer when selling property and casualty insurance products. Agents are appointed by the insurer through a written agreement (contract) that outlines the agent’s authority to represent the insurer.

Because the agent represents the insurer, the agent’s actions are treated as the company’s actions:

An application taken by the agent is considered an application taken by the company.
Payments made to the agent are considered payments made to the company.
Knowledge of the agent is considered knowledge of the company.

Brokers

In contrast to the agency system (where the agent represents the insurer), a broker represents the applicant. A broker may do business with several different insurers.

Brokers are independent sales representatives who select the most appropriate insurance coverage from various companies for their clients. Brokers must be licensed, and their routine activities and functions are generally similar to those of agents.

Solicitors

A solicitor is a person who works for an agent or a broker. The solicitor’s primary functions are to:

solicit insurance
collect initial premiums
deliver policies

Solicitors cannot bind coverage.

Direct writing companies

Call centers and internet-based insurers may pay salaries to employees who sell the company’s insurance products. These salaried employees are producers and must be licensed to sell insurance.

Direct response

Direct response marketing is conducted through the mail, by advertisements on television and radio, and in newspapers and magazines. Policies sold using this method typically have limited benefits and low premiums.

Non-insurance sponsors

A non-insurance sponsor is a business that is not an insurer but offers an insurer’s coverage to its own customers along with its main product, such as a loan or a trip. Examples include banks offering credit insurance, credit card companies offering unemployment insurance, and travel agencies offering travel insurance when a trip is booked.

Types of authority

A producer’s actions and knowledge, within the producer’s authority, are binding on the insurance company the producer represents. A producer’s actions can involve three types of authority:

Express
Implied
Apparent

Express authority is the authority that the insurer explicitly gives the producer in writing, in the agency contract.

Implied authority is given by an insurance company to an agent but is not expressed in writing or otherwise communicated. This authority allows the agent to perform the usual and necessary tasks to sell and service an insurance policy and to carry out the agent’s expressed authority.

Apparent authority exists when the insurer’s conduct causes a client or prospective insured to reasonably believe the agent has the authority to sell an insurance policy or conduct business on behalf of the insurance company. For example, if an insurer terminates an agent but does not take back its application forms, rate manuals, stationery, and business cards, and the agent continues to use them, the client has every reason to believe that the agent does, in fact, represent the insurance company.

Lesson summary

There are different marketing systems for insurance products:

Agency system wherein agents represent the insurer and are appointed through a written agreement, with their actions binding the company’s actions.
Brokers represent the applicant and select insurance coverage from various companies.
Solicitors work for agents or brokers, soliciting insurance and delivering policies but cannot bind coverage.
Direct writing companies have employed sales personnel who sell insurance products through call centers or the internet.
Direct response companies use marketing through mail, advertisements, and media outlets, offering policies with limited benefits and low premiums.

Additionally, there are non-insurance sponsors who provide insurance products, like banks offering credit insurance or credit card companies offering unemployment insurance.

Producer authority in insurance can be of three types:

Express authority is demonstrated by a written agreement given by the insurer to the producer.
Implied authority is not explicitly communicated but allows agents to perform necessary tasks to sell insurance policies.
Apparent authority arises when the insurer’s conduct leads clients to reasonably believe the agent has authority to conduct business on behalf of the insurance company.

Chapter vocabulary

Definitions

Agent: Producers may function as agents, representing the insurance company. Agents are appointed by the insurer through a written agreement (contract) that outlines the agent’s authority to represent the insurer.
Apparent Authority: Exists when the insurer’s conduct or inaction leads a reasonable third party to believe the agent has authority.
Broker: An insurance producer, licensed by the state, who represents various insureds, and who is permitted to place general insurance coverages with any insurance company authorized to transact business in the state in which he/she is licensed.
Captive Agent: An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.
Express Authority: Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.
Implied Authority: Authority that is not expressly granted in the agency contract but that the agent needs in order to carry out the express authority, such as the usual and necessary tasks of selling and servicing insurance. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.
Independent Agent: A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Producer: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Marketing systems overview

Agents represent the insurer; brokers represent the applicant/insured
Both must be licensed; agents work under written agency contracts, brokers place business with multiple insurers

Agency system

Managing General Agent (MGA): appointed by insurer to solicit applications via agents, negotiate contracts, and (if authorized) countersign policies
Agent’s actions = company’s actions:
- Applications taken = taken by company
- Payments to agent = payments to company
- Agent’s knowledge = company’s knowledge

Other distribution channels

Solicitors: work for agents/brokers; solicit business, collect premiums, deliver policies — cannot bind coverage
Direct writing companies: salaried employees (call center/internet) sell insurer’s products; must be licensed
Direct response marketing: sold via mail, TV/radio/print ads; typically limited benefits, low premiums
Non-insurance sponsors: non-insurer businesses offering insurer’s coverage alongside main product (e.g., banks/credit insurance, credit cards/unemployment insurance, travel agencies/trip insurance)

Types of producer authority

Express authority: explicitly granted in writing via agency contract
Implied authority: not written but necessary to perform express duties (e.g., routine premium collection accepted by insurer)
Apparent authority: arises from insurer’s conduct/inaction causing client to reasonably believe agent has authority (e.g., terminated agent still using insurer’s materials)

Key vocabulary

Agent vs. Broker: insurer representative vs. insured representative
Captive Agent: sells for one specific insurer/insurer group
Independent Agent: represents multiple insurers, owns and operates the business (American Agency System)
Producer: general term for one who sells/services/negotiates insurance
Authority terms (Express, Implied, Apparent) defined as above

Next | 1.6 Insurance Contracts

Marketing Systems and Producer Authority

Marketing systems

Producers may function as agents, representing the insurance company, or as brokers, representing the potential insured.

Agency system

Because the agent represents the insurer, the agent’s actions are treated as the company’s actions:

An application taken by the agent is considered an application taken by the company.
Payments made to the agent are considered payments made to the company.
Knowledge of the agent is considered knowledge of the company.

Brokers

In contrast to the agency system (where the agent represents the insurer), a broker represents the applicant. A broker may do business with several different insurers.

Solicitors

A solicitor is a person who works for an agent or a broker. The solicitor’s primary functions are to:

solicit insurance
collect initial premiums
deliver policies

Solicitors cannot bind coverage.

Direct writing companies

Call centers and internet-based insurers may pay salaries to employees who sell the company’s insurance products. These salaried employees are producers and must be licensed to sell insurance.

Direct response

Non-insurance sponsors

Types of authority

A producer’s actions and knowledge, within the producer’s authority, are binding on the insurance company the producer represents. A producer’s actions can involve three types of authority:

Express
Implied
Apparent

Express authority is the authority that the insurer explicitly gives the producer in writing, in the agency contract.

Lesson summary

There are different marketing systems for insurance products:

Agency system wherein agents represent the insurer and are appointed through a written agreement, with their actions binding the company’s actions.
Brokers represent the applicant and select insurance coverage from various companies.
Solicitors work for agents or brokers, soliciting insurance and delivering policies but cannot bind coverage.
Direct writing companies have employed sales personnel who sell insurance products through call centers or the internet.
Direct response companies use marketing through mail, advertisements, and media outlets, offering policies with limited benefits and low premiums.

Additionally, there are non-insurance sponsors who provide insurance products, like banks offering credit insurance or credit card companies offering unemployment insurance.

Producer authority in insurance can be of three types:

Express authority is demonstrated by a written agreement given by the insurer to the producer.
Implied authority is not explicitly communicated but allows agents to perform necessary tasks to sell insurance policies.
Apparent authority arises when the insurer’s conduct leads clients to reasonably believe the agent has authority to conduct business on behalf of the insurance company.

Chapter vocabulary

Definitions

Agent: Producers may function as agents, representing the insurance company. Agents are appointed by the insurer through a written agreement (contract) that outlines the agent’s authority to represent the insurer.
Apparent Authority: Exists when the insurer’s conduct or inaction leads a reasonable third party to believe the agent has authority.
Broker: An insurance producer, licensed by the state, who represents various insureds, and who is permitted to place general insurance coverages with any insurance company authorized to transact business in the state in which he/she is licensed.
Captive Agent: An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.
Express Authority: Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.
Implied Authority: Authority that is not expressly granted in the agency contract but that the agent needs in order to carry out the express authority, such as the usual and necessary tasks of selling and servicing insurance. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.
Independent Agent: A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Producer: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Achievable Casualty

1. General Insurance Concepts

Marketing Systems and Producer Authority

5 min read

Font

Discuss

Feedback

Marketing systems

Producers may function as agents, representing the insurance company, or as brokers, representing the potential insured.

Agency system

Because the agent represents the insurer, the agent’s actions are treated as the company’s actions:

An application taken by the agent is considered an application taken by the company.
Payments made to the agent are considered payments made to the company.
Knowledge of the agent is considered knowledge of the company.

Brokers

In contrast to the agency system (where the agent represents the insurer), a broker represents the applicant. A broker may do business with several different insurers.

Solicitors

A solicitor is a person who works for an agent or a broker. The solicitor’s primary functions are to:

solicit insurance
collect initial premiums
deliver policies

Solicitors cannot bind coverage.

Direct writing companies

Call centers and internet-based insurers may pay salaries to employees who sell the company’s insurance products. These salaried employees are producers and must be licensed to sell insurance.

Direct response

Non-insurance sponsors

Types of authority

A producer’s actions and knowledge, within the producer’s authority, are binding on the insurance company the producer represents. A producer’s actions can involve three types of authority:

Express
Implied
Apparent

Express authority is the authority that the insurer explicitly gives the producer in writing, in the agency contract.

Lesson summary

There are different marketing systems for insurance products:

Agency system wherein agents represent the insurer and are appointed through a written agreement, with their actions binding the company’s actions.
Brokers represent the applicant and select insurance coverage from various companies.
Solicitors work for agents or brokers, soliciting insurance and delivering policies but cannot bind coverage.
Direct writing companies have employed sales personnel who sell insurance products through call centers or the internet.
Direct response companies use marketing through mail, advertisements, and media outlets, offering policies with limited benefits and low premiums.

Additionally, there are non-insurance sponsors who provide insurance products, like banks offering credit insurance or credit card companies offering unemployment insurance.

Producer authority in insurance can be of three types:

Express authority is demonstrated by a written agreement given by the insurer to the producer.
Implied authority is not explicitly communicated but allows agents to perform necessary tasks to sell insurance policies.
Apparent authority arises when the insurer’s conduct leads clients to reasonably believe the agent has authority to conduct business on behalf of the insurance company.

Chapter vocabulary

Definitions

Agent: Producers may function as agents, representing the insurance company. Agents are appointed by the insurer through a written agreement (contract) that outlines the agent’s authority to represent the insurer.
Apparent Authority: Exists when the insurer’s conduct or inaction leads a reasonable third party to believe the agent has authority.
Broker: An insurance producer, licensed by the state, who represents various insureds, and who is permitted to place general insurance coverages with any insurance company authorized to transact business in the state in which he/she is licensed.
Captive Agent: An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.
Express Authority: Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.
Implied Authority: Authority that is not expressly granted in the agency contract but that the agent needs in order to carry out the express authority, such as the usual and necessary tasks of selling and servicing insurance. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.
Independent Agent: A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Producer: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Marketing systems overview

Agents represent the insurer; brokers represent the applicant/insured
Both must be licensed; agents work under written agency contracts, brokers place business with multiple insurers

Agency system

Managing General Agent (MGA): appointed by insurer to solicit applications via agents, negotiate contracts, and (if authorized) countersign policies
Agent’s actions = company’s actions:
- Applications taken = taken by company
- Payments to agent = payments to company
- Agent’s knowledge = company’s knowledge

Other distribution channels

Solicitors: work for agents/brokers; solicit business, collect premiums, deliver policies — cannot bind coverage
Direct writing companies: salaried employees (call center/internet) sell insurer’s products; must be licensed
Direct response marketing: sold via mail, TV/radio/print ads; typically limited benefits, low premiums
Non-insurance sponsors: non-insurer businesses offering insurer’s coverage alongside main product (e.g., banks/credit insurance, credit cards/unemployment insurance, travel agencies/trip insurance)

Types of producer authority

Express authority: explicitly granted in writing via agency contract
Implied authority: not written but necessary to perform express duties (e.g., routine premium collection accepted by insurer)
Apparent authority: arises from insurer’s conduct/inaction causing client to reasonably believe agent has authority (e.g., terminated agent still using insurer’s materials)

Key vocabulary

Agent vs. Broker: insurer representative vs. insured representative
Captive Agent: sells for one specific insurer/insurer group
Independent Agent: represents multiple insurers, owns and operates the business (American Agency System)
Producer: general term for one who sells/services/negotiates insurance
Authority terms (Express, Implied, Apparent) defined as above

Next | 1.6 Insurance Contracts

Marketing Systems and Producer Authority

Marketing systems

Producers may function as agents, representing the insurance company, or as brokers, representing the potential insured.

Agency system

Because the agent represents the insurer, the agent’s actions are treated as the company’s actions:

An application taken by the agent is considered an application taken by the company.
Payments made to the agent are considered payments made to the company.
Knowledge of the agent is considered knowledge of the company.

Brokers

In contrast to the agency system (where the agent represents the insurer), a broker represents the applicant. A broker may do business with several different insurers.

Solicitors

A solicitor is a person who works for an agent or a broker. The solicitor’s primary functions are to:

solicit insurance
collect initial premiums
deliver policies

Solicitors cannot bind coverage.

Direct writing companies

Call centers and internet-based insurers may pay salaries to employees who sell the company’s insurance products. These salaried employees are producers and must be licensed to sell insurance.

Direct response

Non-insurance sponsors

Types of authority

A producer’s actions and knowledge, within the producer’s authority, are binding on the insurance company the producer represents. A producer’s actions can involve three types of authority:

Express
Implied
Apparent

Express authority is the authority that the insurer explicitly gives the producer in writing, in the agency contract.

Lesson summary

There are different marketing systems for insurance products:

Agency system wherein agents represent the insurer and are appointed through a written agreement, with their actions binding the company’s actions.
Brokers represent the applicant and select insurance coverage from various companies.
Solicitors work for agents or brokers, soliciting insurance and delivering policies but cannot bind coverage.
Direct writing companies have employed sales personnel who sell insurance products through call centers or the internet.
Direct response companies use marketing through mail, advertisements, and media outlets, offering policies with limited benefits and low premiums.

Additionally, there are non-insurance sponsors who provide insurance products, like banks offering credit insurance or credit card companies offering unemployment insurance.

Producer authority in insurance can be of three types:

Express authority is demonstrated by a written agreement given by the insurer to the producer.
Implied authority is not explicitly communicated but allows agents to perform necessary tasks to sell insurance policies.
Apparent authority arises when the insurer’s conduct leads clients to reasonably believe the agent has authority to conduct business on behalf of the insurance company.

Chapter vocabulary

Definitions

Agent: Producers may function as agents, representing the insurance company. Agents are appointed by the insurer through a written agreement (contract) that outlines the agent’s authority to represent the insurer.
Apparent Authority: Exists when the insurer’s conduct or inaction leads a reasonable third party to believe the agent has authority.
Broker: An insurance producer, licensed by the state, who represents various insureds, and who is permitted to place general insurance coverages with any insurance company authorized to transact business in the state in which he/she is licensed.
Captive Agent: An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.
Express Authority: Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.
Implied Authority: Authority that is not expressly granted in the agency contract but that the agent needs in order to carry out the express authority, such as the usual and necessary tasks of selling and servicing insurance. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.
Independent Agent: A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Producer: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.