Insurance Broker Certification Practice Exam

Which agency system involves a general agent representing only one company?

1. Independent agency system

2. Exclusive agency system

3. Managerial system

4. General agency system

The correct answer is: General agency system

In the context of insurance agency systems, the option pertaining to a general agent representing only one company aligns with the definition of the exclusive agency system. This system is characterized by the fact that an agent operates on behalf of a single insurance company, often referred to as a captive agent. These agents are typically provided with substantial support and resources from the company they represent. The exclusive agency system emphasizes the depth of the relationship between the agent and the insurance company, allowing agents to specialize in that company's products and services, which can lead to enhanced customer service and product knowledge. This focus is distinct from other systems, such as the independent agency system, where agents represent multiple insurance companies and can offer a variety of products to their clients. In contrast, the managerial system involves agents who may operate under a structured corporate framework, but typically do not exclusively represent one company in the manner of exclusive agents. The general agency system generally refers to agents or agencies that can represent multiple companies, making it different from the exclusive agency system. Overall, the defining characteristic of the exclusive agency system is that it allows agents to build their business and client relationships specifically around the products and support of a single insurance provider, thereby enhancing brand loyalty and product expertise.