Insurance Entities: Agents, Brokers, and Insurer Types

1. Insurance Agents

An insurance agent legally represents the insurance company (principal) and acts on its behalf. Their authority stems from express, implied, and apparent authority.

2. Insurance Brokers

A broker legally represents the insured. They don't have the authority to bind the insurer but can solicit and accept insurance applications, placing coverage with a suitable insurer. Brokers receive commissions from insurers where the business is placed.

3. Exclusive Agency System

In this system, an agent represents only one insurer or a group of insurers under common ownership. Agents may be contractually restricted from representing other insurers. They don't own policy expirations or renewal rights; the agency does. Renewal commissions are typically lower than new business commissions.

4. Direct Response System

This marketing system sells life and health insurance directly to consumers without agents. Potential customers are reached through television, radio, mail, newspapers, online media, and telemarketing.

5. Direct Writers

A direct writer is an insurer whose salespeople are employees, not independent contractors. The insurer covers all selling expenses, including salaries. Employees represent only one insurer and are compensated with a salary plus commission structure.

6. Mutual Insurers

Mutual insurers are owned by policyholders, not stockholders. Policyholders elect a board of directors who appoint executives to manage the company.

7. Fraternal Insurers

These are mutual insurers providing life and health insurance to members of social or religious organizations. They are also known as fraternal benefit societies.

8. Stock Insurers

Stock insurers are corporations owned by stockholders, aiming to generate profits for them.

9. Captive Insurers

Captive insurance companies are established by parent groups to cover their own risks, essentially a form of self-insurance. They may also insure risks of the parent group's customers, offering more control over insurance arrangements.

10. Assessment Mutuals

These insurers have the right to assess policyholders an additional amount if their financial operations are unfavorable.