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Methods of Selling Life Insurance
Life insurance companies may sell their insurance policies through full-time agents, brokerage markets, direct sales, or mass marketing.
The Distinction Between an Insurance Agent and an Insurance Broker
Insurance agents act on behalf of one or more insurance companies. That relationship between the insurance agent and the insurance company provides authority for the agent to act for and bind the insurance company. Insurance brokers, on the other hand, represent insurance purchasers rather than insurance companies even though insurance brokers may receive their commissions from insurance companies. Insurance brokers do not have authority under principal-agent or employer-employee theories to bind the insurance companies that provide the policies insuring companies or individuals.
The Meaning of an Insurance Binder
A binder in the insurance industry is a temporary agreement of the insurance company to provide coverage while it seeks to issue a policy based upon the representations made in the application for insurance. The binder may be issued by an insurance agent or an insurance company.
Risk Retention Groups
Risk retention groups serve as captive insurance companies formed to provide insurance to members of the group. Rather than purchase insurance from independent insurers, the group of companies forms its own insurance company. Companies with similar risk management concerns thus may exercise greater control over their insurance coverage, pricing, and claims administration.
The Duty of Reinsurers to Follow the Fortune of Cedant Insurers
Most reinsurance contracts by which an insurance company cedes or reinsures a portion of the coverage for policyholders to a reinsurer call for the reinsurer to "follow the fortune" of the insurer. Thus, the reinsurer is expected to pay the reinsured percentage of a claim without questioning how the insurer handled the claim. The follow the fortune doctrine is an extension of the "utmost good faith" that by tradition has governed the relationship of the ceding insurer to the reinsurer.
