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8. Describe briefly the following distribution systems in

the marketing of property and casualty insurance.

a. Independent agency system

The independent agency system has several basic characteristics.

First , the independent agency is a business firm that usually represents several unrelated insurers . Second, the agency owns the expirations or renewal rights to the business .Third, the independent agent is compensated by commissions that vary by line of insurance .

b. Exclusive agency system

Under the exclusive agency system , the agent represents only one insurer or a group of insurers under common ownership . Agents under the exclusive agency system do not usually own the expirations or renewal rights to the policies. In addition, the contract usually permits the insurer to buy the expiration list from the exclusive agent to establish its value if the agency contract is terminated. Another difference is the payment of commissions. Exclusive agency insurers generally pay a lower commission rate on renewal business than on new business. This approach results in a strong financial incentive for the agent to write new business and is one factor that helps explain the historical growth of exclusive agency insurers.

c. Direct writer - Technically, a direct writer is an insurer in which the salesperson is an employee of the insurer, not an independent contractor . The insurer pays all the selling expenses, including the employee’s salary. Similar to exclusive agents, an employee of a direct writer usually represents only one insurer.

d. Direct response system - A direct response insurer sells directly to the public by television, telephone, mail, newspapers, and other media. Property and casualty insurers also operate Web sites that provide considerable consumer information and premium quotes. The direct response system is used primarily to sell personal lines of insurance, such as auto and homeowners insurance.

e. Multiple distribution systems - To increase...