Career Agency, Personal Producing General Agency, & Independent Agency ***
MR. WATSON: Now, there are three systems that support the sale of insurance through agents and brokers.
Career Agency System
MR. WATSON: The first one is called the career agency system . Career agency systems are headed by a general agent . So Prudential hires David Watson to be the general agent in a certain geographical area, let's say Hillsborough County. I will hire you guys. You are the career agents. You work for Prudential, I am the Big Dog, I am your boss. Career agent, you are the career agent. I am going to train you, I will give you clerical plus I will give you everything you need to succeed. You are a captive agent. If I found out that you were writing business for any other company, I am going to fire you. Does that make sense?
STUDENTS: Yes.
MR. WATSON: So you work for the company, but I'm your boss. I get a piece of you. For every dollar you earn in commissions, I get a piece of that. I get an override. Does that make sense?
STUDENTS: Yes.
MR. WATSON: Tell me if this is true. In a career agency system, both the career agent and general agent sell and train. True or false?
STUDENTS: False.
MR. WATSON: Why is that false?
STUDENT: Because the career agent sells. The general agent trains.
MR. WATSON: Very good. The general agent can sell, but most of his responsibility is to try and get everybody else out there selling. Does that make sense?
STUDENTS: Yes.
Personal Producing General Agent
MR. WATSON: But let's say you want to be the general agent. You can leave the career agency system, hang out your own shingle and be called Big Dawg's Financial Planning and Tire Changing When Times Are Slow, Incorporated. You are then called a personal producing general agent or a PPGA. Personal producing general agent, they produce. You are a general agent that produces, personally. You are responsible for yourself. You pay for your own clerical, your own staff, your own building, everything. How do you get paid? By selling. Any agent who works for a PPGA is an employee of the PPGA, not the insurance company.
Independent Agency System
MR. WATSON: The other one is called an independent agency system . They represent many different insurance companies. Known as the American Agency system. Ask me the difference between the personal producing general agency and the independent agency system.
STUDENTS: What's the difference?
MR. WATSON: I couldn't tell you. But if I had to, I would tell you that the PPGA is an orthodontist. He's a specialist. The independent agency guy is a jack-of-all-trades. He's the dentist. The independent agency does it all. He sells life insurance, homeowner's insurance, auto insurance. He does it all. Jack-of-all-trades, master of none.
MR. WATSON: The PPGA would be a financial planner. He would be a retirement planner. He would be an estate planner. He specializes. Does that make sense?
STUDENTS: Um-hmm.
MR. WATSON: The key to both of these, the personal producing general agency and the independent agency system, is that they work for themselves. They have their own shingles hanging out. Could I have a foot over here as a PPGA or independent agency system and a foot over here under the career agency system?
STUDENTS: No.
MR. WATSON: Why?
STUDENT: On the career agency, they have you tied, captive.
MR. WATSON: Right. They would fire you. Do you agree?
STUDENT: Yes.
Other Methods of Selling Insurance
Direct Selling
MR. WATSON: Now, you have direct selling and you have mass marketing. Which one of these systems uses no agent-- mass marketing or direct selling?
MR. WATSON: The answer is direct selling, (also called "direct writers" or "direct response insurers").
MR. WATSON: Direct selling. No agent will ever contact you. You see it on TV all the time. The company deals directly with the consumer. In the past one could buy through a vending machine at the airport.
MR. WATSON: They use no agent. They use a spokesman. And the company deals directly with the public, cutting out the middleman.
Mass Marketing
MR. WATSON: Mass-marketing approaches you the same way. Maybe they hired some actor, whatever. But the difference is, you call this number, fill out this form in a Readers Digest or newspaper or magazine, and some agent contacts you.
MR. WATSON: The point is, direct selling uses no agent. Mass marketing does. All of the following provide insurance through agents and brokers -- except which one?
MR. WATSON: The answer is direct selling.