APPLICATION QUESTION 2 a.b.c.

104 CHAPTER 5 / TYPES OF INSURERS AND MARKETING SYSTEMS 9. Who owns the policy expirations or the renewal rights to the business under the independent agency system? 10. What is a mass-merchandising plan in property and liability insurance? Direct response system (102) Direct writer (102) Exclusive agency system (101) Fraternal insurer (94) Holding company (95) Independent agency system (101) Interinsurance exchange (96) Lloyd's of London (96) Mass merchandising (102) Multiple distribution systems (103) Multiple line exclusive agency system (100) Mutual insurer (94) Nonadmitted insurer (98) Personal-producing general agent (100) Personal selling distribution systems (99) Reciprocal exchange (96) Savings bank life insurance (SBLI) (98) Stock insurer (94) Surplus lines broker (98) APPLICATION QUESTIONS REVIEW QUESTIONS 1. Describe the basic characteristics of stock insurers. 2. a. Describe the basic features of mutual insurers. b. Identify the major types of mutual insurers. 3. The corporate structure of mutual insurers has changed over time. Briefly describe several trends that have had an impact on the corporate structure of mutual insurers. 4. Explain the basic characteristics of Lloyd's of London. 5. Describe the basic characteristics of a reciprocal exchange. 6. Explain the legal distinction between an agent and a broker. 7. Describe briefly the following distribution systems in the marketing of life insurance. a. Personal selling systems b. Financial institution distribution systems c. Direct response system d. Other distribution systems 8. Describe briefly the following distribution systems in the marketing of pro and casualty insurance. a. Independent agency system b. Exclusive agency system c. Direct writer d. Direct response system e. Multiple distribution systems 1. A group of investors are discussing the formation of a new property and liability insurer. The proposed com- pany would market a new homeowners policy that combines traditional homeowner coverages with unem- ployment benefits if the policyholder becomes involun- tarily unemployed. Each investor would contribute at least $100,000 and would receive a proportionate interest in the company. In addition, the company would raise additional capital by selling ownership rights to other invest Management wants avoid the expense of hiring and training agents to sell the new policy and wants to sell the insurance directly to the public by selective advertising in personal finance magazines. a. Identify the type of insurance company that best fits the preceding description. b. Identify the marketing system that management is considering adopting, 2. Compare a stock insurer to a mutual insurer with respect to each of the following: a. Parties who legally own the company b. Right to assess policyholders additional premiums c. Right of policyholders to elect the board of directors 3. A luncheon speaker stated that the number of life insurers has declined sharply during the past decade because of the increase in company mergers and acqui- sitions, demutualization of insurers, and formation of mutual holding companies." a. Why have mergers and acquisitions among insurers increased over time? b. What is the meaning of demutualization? c. Briefly explain the advantages of demutualization of a mutual life insurer. d. What is a mutual holding company? e. What are the advantages of a mutual holding com- pany to an insurer