2.3 Differences between Private and Government Insurers
What are the primary types of agency systems?
- Career Agency System; - Personal Producing General Agency System; - Independent Agency System; - Managerial System; and - Mass Marketing.
What are the 2 types of agents?
1. Captive/exclusive career agents 2. Independent agents
Alien Insurer
An alien insurer is any insurer that conducts business in a country in which it wasn't incorporated.
Who are brokers?
Brokers are not appointed with any insurance company, and can sell insurance for several companies. For insurance transactions, brokers represent the purchaser.
In cases where government insurance is voluntary, how is the cost of insurance covered?
In cases where government insurance is voluntary, the cost of insurance is subsidized through tax dollars, so in effect participation is unanimous.
Why do unauthorized insurers not have licensure?
Unauthorized insurers do not have licensure because they have not yet applied, have applied and been denied licensure, or are excess and surplus lines insurers.
Who are unauthorized insurers?
Unauthorized insurers, also referred to as non-licensed or nonadmitted insurers, are not allowed to transact insurance business in a particular state, with the exception of excess and surplus lines insurers.
How do career agency systems work?
With the career agency system, agents, working as employees of the insurer, sell the insurance company's products to the public, while brokers represent prospective insureds. General agents earn commissions on the policies they sell and on those sold by other agents they manage. In contrast to independent agents, the insurer owns policies sold by captive agents, so the insured is the insurer's customer.
Who do Captive agents work for?
Captive agents work for only one insurer
How are private insurance and government insurance funded?
Private insurance purchased by individuals must be fully funded. Private insurers must have liquid capital to pay claims. Private insurance is funded by premiums. Government insurance is not fully funded, relying on subsidies and loans.
Foreign Insurer
A foreign insurer is any insurer that conducts business in a state or district in which it wasn't incorporated.
What audience does government and private insurance focus on?
Government insurance focuses on sufficient benefits for all participating people; whereas, private insurance focuses on equitable coverage for buyers.
What are government insurance and private insurance based on?
Government insurance is based on statutes (laws) whereas; private insurance is based on contractual rights. In other words, a person who receives medical benefits through a private insurer can legally demand payment of benefits based on the terms of the contract. On the other hand, medical benefits provided by government insurance, such as Medicare or Medicaid, are based on laws, which can be changed.
What is government insurance established for?
Government insurance is established to benefit a social need and provide coverage that private insurers cannot afford or refuse to issue.
Domestic Insurer
An insurer that conducts business in the state it was incorporated is a domestic insurer.
Who are agents?
Agents are appointed to work on behalf of insurance companies. For insurance transactions, agents represent the insurance company
Who do independent agents work for?
Independent agents work for themselves or for several insurers non-exclusively.
How do managerial systems work?
With the managerial system, branch offices are established in several locations. Instead of a general agent running the agency, the insurer employs a salaried branch manager. The branch manager supervises agents working out of that branch office. The insurer pays the branch manager's salary and pays him a bonus based on the amount and type of insurance sold and number of new agents hired.
How do Personal Producing General Agency Systems (PPGA)s work?
With the personal producing general agency (PPGA) system, agents work for an independent agency selling policies from several insurance companies. Unlike the career agency system, agents are not employees of the insurance company. Instead, they work for the PPGA. In other words, while career general agents (CGA) primarily recruit and train, PPGAs primarily sell.
Who do brokers represent?
insured
Who do agents represent?
insurer
What is franchise marketing?
Another form of mass marketing is franchise marketing, where insurance is sold to a small group or association and each insured receives their own individual policy.
What is mass marketing?
Another way to sell insurance is through mass marketing methods. These methods are commonplace today, and include direct response, such as insurance sold: On television, On radio, By mail, Over the internet, and In vending machines.
Who are authorized insurers?
Authorized insurers, also referred to as admitted or licensed insurers, are insurers who have received a certificate of authority authorizing them to transact insurance in a particular state for a particular line or lines of insurance.
What authorizes an insurer to sell insurance for particular lines (i.e., life, health, property, casualty, etc.)
Certificate of Authority
What are distribution systems?
Distribution systems are the ways insurance products are marketed and sold to the public.
How do independent agency systems or American Agency systems work?
Independent insurance agents are appointed to work for several insurers non-exclusively. They may also work for themselves or under other insurance agents. Independent insurance agents have control and ownership over their clients' accounts. This means they may place clients' business with a different insurer when policies are up for renewal. Independent insurance agents earn commissions on the sales they make, and overrides on sales made by agents they manage.
What are independent rating organizations?
Independent rating organizations are credit rating agencies that rate or grade the financial strength and stability of insurers based on claims, reserves, and company profits.