Question

1. The American Agency System represents many companies, and the agent is said to “own the expirations.” The Direct Writing system operates through exclusive agents such as State Farm, for example as well as captive agents like Allstate. Highlight the importance of ownership of renewals to the agent in the American Agency System and the Direct Writing System.

2. Costs common to all insurers include losses and loss adjustment expense, acquisition expenses, or marketing and sales expenses, administrative expenses (company overhead), taxes, and profits/contingencies. Explain the extent to which these costs may differ from one insurer to another.

Answer 1

1. Importance of ownership of renewals to the agent in the American Agency System and the Direct Writing System:

• It is very important to maintain a strong relation with the agent as they are the persons who help to meet your insurance requirements.
• The agent of the agency system have more understanding of how a business operates in the market than a company. So it is very essential to make renewals.
• The agents has more experience facing various types of issues entering the market and leading the company in a better way.
• If the company makes time to renewal and meet the agent regarding the concerns , he may quote better renewal pricing, terms and conditions, etc. The company should always treat the agent as if he or she was a potential customer.
• Any company will progress if they maintain a good agency relationship with their agents. A long relationship will always make a company reliable on the agent and manage risks arising with the agents.
• The agent and the company together can make huge profits if they work as a team . Therefore renewals are important.

2. Extent to which costs may differ from one insurer to another are as follows:

• The discounts given by each may be different from one to another.
• Reviewing the information with your insurance company of your insurance may charge you differently according to new situations and may vary from one another.
• Due to credit scoring also insurance costs differ.
• Perks offered by insurer and level of coverage options vary.
• Some insurers may combine different policies to reduce costs .
• Depending upon their experience and cost of doing business , these costs may also differ from one to another.