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Basic characteristics of the following marketing system used in life and health insurance: a. Agency building system b. Nonbinding agency system c. Direct response system 1- Agency building system: This system involves hiring and training new agents that represent only the insurer. Sales can be expanded by hiring and training more new agents. There are 2 different kinds of systems: General agency system: the insurer hires a salesperson that has experiences and represents only the insurer. That salesperson is responsible for a territory, and for hiring and even training new agents. Commission received will be based on the amount of sales.
Managerial system: this is the most expensive for the insurer. Mostly, the insurer opens a branch office and hires a manager and that manager will be in charge of hiring, training and managing to run the branch. The manager usually does not sell Insurance. Salary Is paid and commission on the business of his sales team. 2- Nonbinding agency system: this kind of system uses agents that already selling life insurance. The new agents who hired by the company as independent contractor and paid above average commission In exchange. If the company want to expand heir business, they simply hire new Independent agents.
This kind of system depends on agents that can manage their own affair Individually without supervision. They pay for their own expenses. The Insurance company does not need to pay for space and other expanses. 3- Direct response system: This kind of system Is the most cost effective for the consumer. With this system, the cost of marketing product Is much cheaper than using agency network. Direct response system using traditional media or Internet. It would be easier for consumers to compare benefits they would have from other company without moving out of their seats.