Chapter 4
For insurance agents, the method of premium collection determines how sales commissions are received. If the insurer direct bills, Choose one answer. A. The agency periodically mails a commission check to the insurer. B. The agency subtracts its commission on each policy and remits the premium balance to the insurer. C. The insurer periodically mails a commission check to the agency. D. The insured sends a separate commission payment directly to the agency.
A. The agency periodically mails a commission check to the insurer. If the insurer direct bills, the insurer periodically mails a commission check to the agency.
Insurance Company D (ICD) has traditionally used regional brokers to market and produce its insurance products. The management team at ICD has decided it wants to launch a new specialized product. The marketing plan includes ICD's desire to control the targeted number of monthly applications as well as the methods that will be used to advertise and campaign to achieve the desired results. Which one of the following distribution systems will best allow ICD the desired control? Choose one answer. A. Regional brokerage B. Direct writer C. Exclusive agency D. Independent agency
B. Direct writer The direct writer system will best allow ICD the desired control because an insurer can exercise the greatest control over producers in the direct writer system.
Insurance Company D (ICD) has traditionally used regional brokers to market and produce its insurance products. The management team at ICD has decided it wants to launch a new specialized product. The marketing plan includes ICD's desire to control the targeted number of monthly applications as well as the methods that will be used to advertise and campaign to achieve the desired results. Which one of the following distribution systems will best allow ICD the desired control? Choose one answer. A. Regional brokerage B. Direct writer C. Exclusive agency D. Independent agency
B. Direct writer The direct writer system will best allow ICD the desired control because an insurer can exercise the greatest control over producers in the direct writer system.
In an insurance agency relationship, the agent's fundamental responsibility is to act for the benefit of the Choose one answer. A. Insured. B. Insurer. C. Broker. D. Policyholder.
B. Insurer In an insurance agency relationship, the agent's fundamental responsibility is to act for the benefit of the insurer.
In an insurance agency relationship, the agent's fundamental responsibility is to act for the benefit of the Choose one answer. A. Insured. B. Insurer. C. Broker. D. Policyholder.
B. Insurer.
Producers' licenses are generally issued for a term of Choose one answer. A. Six months. B. One or two years. C. Five years. D. The life of the producer.
B. One or two years.
Producers' licenses are generally issued for a term of Choose one answer. A. Six months. B. One or two years. C. Five years. D. The life of the producer.
B. One or two years. Producers' licenses are generally issued for a term of one or two years.
The most difficult time for an insurer to change distribution systems is when Choose one answer. A. Expanding to a larger territory. B. Entering a new target market. C. Renewing an existing book of business. D. Launching a new insurance product.
C. Renewing an existing book of business.
The most difficult time for an insurer to change distribution systems is when Choose one answer. A. Expanding to a larger territory. B. Entering a new target market. C. Renewing an existing book of business. D. Launching a new insurance product.
C. Renewing an existing book of business. The most difficult time for an insurer to change distribution systems is when renewing an existing book of business.
A producer will generally review a company's loss run report while performing which one of the following functions? Choose one answer. A. Claims handling B. Sales C. Risk management review D. Customer service
C. Risk management review
A producer will generally review a company's loss run report while performing which one of the following functions? Choose one answer. A. Claims handling B. Sales C. Risk management review D. Customer service
C. Risk management review A producer will generally review a company's loss run report while performing risk management review.
For insurance agents, the method of premium collection determines how sales commissions are received. If the insurer direct bills, Choose one answer. A. The agency periodically mails a commission check to the insurer. B. The agency subtracts its commission on each policy and remits the premium balance to the insurer. C. The insurer periodically mails a commission check to the agency. D. The insured sends a separate commission payment directly to the agency.
C. The insurer periodically mails a commission check to the agency. If the insurer direct bills, the insurer periodically mails a commission check to the agency.
An important question for an insurer to ask when examining customers' needs and characteristics to select a distribution channel is Choose one answer. A. Who is the target market? B. Is the expertise of the current staff adequate? C. Does cost outweigh the benefit? D. How quickly can inquiries and transactions be processed?
D How quickly can inquiries and transactions be processed? An important question for an insurer to ask when examining customers' needs and characteristics to select a distribution channel is "how quickly can inquiries and transactions be processed?"
T. Roy Insurance Company is selecting a distribution system and channel for its products. Which one of the following best describes the type of consideration that T. Roy should give to its operations? Choose one answer. A. What are customer's expectations regarding accessibility? B. Will customers be willing to pay a premium for services? C. Can customers navigate easily within the channel? D. Does it have the necessary financial resources?
D) Does it have the necessary financial resources? The initial fixed cost of entering the market through the exclusive agency system or direct writer system is greater than doing so through the independent agency system. Similarly, Internet-based distribution channels have high start-up costs for supporting information system. A direct response campaign cost can be much lower
When an insurance company appoints an insurance agent to serve as its representative, what specifies the scope of authority given to the agent in this relationship? Choose one answer. A. Implied authority B. Binding authority C. A unilateral contract D. An agency contract
D. An agency contract
When an insurance company appoints an insurance agent to serve as its representative, what specifies the scope of authority given to the agent in this relationship? Choose one answer. A. Implied authority B. Binding authority C. A unilateral contract D. An agency contract
D. An agency contract An agency contract specifies the scope of authority given to the agent in this relationship.
Rhonda is a personal lines insurance producer. Under the terms of her agency contracts, the insurers forward policies promptly to Rhonda's customers and send a premium invoice with the policy. Insureds are instructed to remit premium payments to their insurer. The insurers calculate Rhonda's commissions and forward those commission payments to her monthly. Rhonda is operating under which one of the following payment procedures? Choose one answer. A. Item basis B. Statement basis C. Account current basis D. Direct bill basis
D. Direct bill basis
Rhonda is a personal lines insurance producer. Under the terms of her agency contracts, the insurers forward policies promptly to Rhonda's customers and send a premium invoice with the policy. Insureds are instructed to remit premium payments to their insurer. The insurers calculate Rhonda's commissions and forward those commission payments to her monthly. Rhonda is operating under which one of the following payment procedures? Choose one answer. A. Item basis B. Statement basis C. Account current basis D. Direct bill basis
D. Direct bill basis Rhonda is operating under a direct bill basis.
Which one of the following premium collection methods is used in the majority of personal insurance sales? Choose one answer. A. Item basis B. Statement basis C. Account current basis D. Direct bill process
D. Direct bill process In the majority of personal insurance sales, the direct bill process is used for premium collection.
Which one of the following premium collection methods is used in the majority of personal insurance sales? Choose one answer. A. Item basis B. Statement basis C. Account current basis D. Direct bill process
D. Direct bill process In the majority of personal insurance sales, the direct bill process is used for premium collection.
Bill is an insurance producer for ABC Insurance Company (ABC). He represents only ABC when marketing insurance products. ABC compensates Bill primarily through salary, and he has no ownership rights to policy expirations. Bill is a producer in the Choose one answer. A. Independent agency marketing system. B. Exclusive agency marketing system. C. Captive agency marketing system. D. Direct writer marketing system.
D. Direct writer marketing system.
Bill is an insurance producer for ABC Insurance Company (ABC). He represents only ABC when marketing insurance products. ABC compensates Bill primarily through salary, and he has no ownership rights to policy expirations. Bill is a producer in the Choose one answer. A. Independent agency marketing system. B. Exclusive agency marketing system. C. Captive agency marketing system. D. Direct writer marketing system.
D. Direct writer marketing system. Bill is a producer in the direct writer marketing system.
T. Roy Insurance Company is selecting a distribution system and channel for its products. Which one of the following best describes the type of consideration that T. Roy should give to its operations? Choose one answer. A. What are customer's expectations regarding accessibility? B. Will customers be willing to pay a premium for services? C. Can customers navigate easily within the channel? D. Does it have the necessary financial resources?
D. Does it have the necessary financial resources? The initial fixed cost of entering the market through the exclusive agency system or direct writer system is greater than doing so through the independent agency system. Similarly, Internet-based distribution channels have high start-up costs for supporting information system. A direct response campaign cost can be much lower.
An important question for an insurer to ask when examining customers' needs and characteristics to select a distribution channel is Choose one answer. A. Who is the target market? B. Is the expertise of the current staff adequate? C. Does cost outweigh the benefit? D. How quickly can inquiries and transactions be processed?
D. How quickly can inquiries and transactions be processed? An important question for an insurer to ask when examining customers' needs and characteristics to select a distribution channel is "how quickly can inquiries and transactions be processed?"
