Professional Documents
Culture Documents
Chapter 5 B
Chapter 5 B
Types of Insurers
and Marketing
Systems
• A reciprocal exchange is an
unincorporated mutual.
– The reciprocal is managed by an attorney-in-
fact (Attorney–in-fact: a corporation that is
authorized to seek new members, pay losses,
collect premiums, invest in funds, etc.)
– In a pure reciprocal exchange, insurance is
exchanged among the members; each member
of the reciprocal insures the other members,
and in turn is insured by them.
• A separate account is kept for each member
– A modified reciprocal exchange is similar to an
advance premium mutual
• No individual accounts kept for the members
Copyright © 2011 Pearson Prentice Hall. All rights reserved.
5-15
Types of Private Insurers
• Classified as:
– Agency Building System
– Non-building Agency System
– Direct Response System
– Managerial system
• Branch offices are established in various areas
• The branch manager is an employee of the company. He is responsible for hiring
and training new agents, and receives a salary plus commission from the insurer
• Insurer pays expenses of the branch office including financing new agents.
• Classified as:
– Independent Agency System
– Exclusive Agency System
– Direct Writer
– Direct Response System
– Multiple Distribution System.