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C11 Back of Textbook chapter 4-6
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C11 Back of Textbook chapter 4-6
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C11 Back of Textbook chapter 4-6Explain how insurers get their products to the consumer through the independent
agency and brokerage system, exclusive agency system and direct writing
system (6) - CORRECT ANSWER-Independent agency & brokerage
-Large insurance companies appoint independent brokers to be their sales force
and to bring clients to them.
-They pay a commission for each policy they issue on behalf of the broker's
clients
-Client list usually belongs to the broker , not the insurer
Exclusive Agency System
-Market their policies through exclusive agents who represent only one company
- Not employees of the insurance company
-Paid by commission and must pay their own expenses
-Client list belongs to insurer
-Commission higher for new business to encourage production
-ex. Statefarm
Direct Writing Companies
-Deal directly with the public
-Employ a force of producers to sell policies to prospective insureds
, -Producers are employees who are paid by salary, salary and cash bonus, or
salary plus commission based on sales
-Commission higher for new business to encourage production
-Business belongs to insurer
-Companies issues and services the policies and bills and collects the premiums
-ex. Allstate and Co-operators
Describe how the principal-agent relationship enables one entity to legally
appoint another to act on its behalf (4) - CORRECT ANSWER-Under common
law
-Agents are employed to secure contracts or act for their employers in
contractual matters.
-Agents may be independent business people or employees
Civil Code of Quebec
-Mandate: Contract by which a person called the mandator (principal) commits a
lawful business to the management of another called the mandatary (agent), who
by accepting the contract is obliged to perform the contract
Places obligations on agents to their principals and obligations on the principals
to their agents
Places obligations on each of them toward third parties who enter into
negotiations or form contracts with them
Intermediaries, through relationships or contracts with insurance companies, may
be authorized to do all that the insurers do, including issuing policies and settling
claims.
Or
They may only have authority to solicit applications and submit these to the
insurer for consideration
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