Insurance Planning | III. Types Of Insurers Marketing

A. Types of Insurers:

Stock Insurers

  • Owned by shareholders
  • Contracts non-assessable
  • Dominant in Property & Liability (P&C)

Mutual Insurers

  • Owned by policyowners
  • Dominant in Life insurance (L&D)
  • Assessment mutual, advance premium mutual, factory mutual, & fraternal insurers
  • Demutualization

Reciprocal Exchange

- Unincorporated mutual
- Managed by an attorney-in-fact (corporation)

Lloyd’s Association

Blue Cross and Blue Shield

Blue Cross – Association of Hospitals
Blue Shield – Association of Doctors
Anthem Blue Cross

Health Maintenance Organizations (HMO)

- Knox-Keene Act 1974 -Kaiser
- CA Department of Managed Health Care (DMHC)

B. Agents and Brokers:

1. Legal status of an Agent

Authorized agent can bind for principal
Authority – express, implied, apparent powers

2. Brokers

Represents the insured
May provide services- risk management, loss control, commercial marketing

C. Types of Marketing Systems

Life Insurance

1. Agency building system
2. Non-agency system
3. Direct response system

Property and Liability

1. Independent agency – local agent represents several insurers
2. Exclusive agency- agent represents one company, does not own contracts, lower commission, in exchange for company support (financial, referral, training).
3. Direct writer- salary + bonus employee of the company
4. Direct response – insurer sells to selected market segments using- internet,television, mass mailing
5. Multiple distribution- any combination of the above systems

D. Insurance Pricing

Rate Making

Insurance companies hire many statisticians, actuaries, and underwriters to help them manage the risk of all their insurance policies. While selecting a low price may attract more customers, an insurance company may also attract people who are at a higher risk of being paid on their insurance policy which can financially impact a company's profits.

Regulatory Factor

Insurance companies are typically regulated by the state they are doing business in. In some cases, an insurance company may have a subsidiary company or do business as a different name that solely does business in one state in order to follow the rules of that state.

Adequate – premium high enough to cover claim + expenses and leave a margin for contingencies & profit
Not excessive or unfairly discriminatory (e.g. redlining)

Business Objective
Simple, stable, responsive, encourage loss prevention

Rate, exposure unit, pure premium, loading, gross premium

P&C Rating
Judgment Rating
Each exposure individually evaluated
Rate determined by the underwriter
Use when diverse loss exposure prevents class rating or when credible loss statistics are unavailable

Class Rating

An insurance company may decide to price their insurance policies using a rating system where similar characteristics group are charged the same rate.

Merit Rating

Physical characteristics

Experience Merit Rating

Based on past loss experience, an insurance company may decide to price an insurance policy higher.

Retrospective Merit Rating

Based on present loss experience, an insurance company may set the premium.


  • Reflects redundant premiums paid during early years
  • Liability item on the company’s balance sheet, offset by equal assets (legal reserve)
  • Purpose

** Legal test of solvency

Types of Reserves:

Retrospective, Prospective, Terminal
Initial, Mean,
AM Best
- Rating
- Financial Class Size
- Other information
Joe Belth’s Report

Insurance Company Evaluation

With so many insurance companies offering very similar products, the company that is selected for insurance will be important for risk protection. A common way to evaluate an insurance company is by checking their financial strength.

The following companies offer independent information and reports, some with insurance company ratings and/or a rating of the insurer’s financial stability:

A.M. Best
“The Insurance Information Source”
Oldwick, New Jersey 08858
Offers free insurance company ratings, analysis and other information.
Top Rating: A++

Moody’s Investors Services
99 Church Street
New York, New York 10007
Extensive information on life insurance companies (registration required).
Top Rating: Aaa

Standard & Poor’s Insurance Ratings Service
55 Water Street
New York, New York 10041
Specializes in credit ratings and includes insurance company credit ratings.
Top Rating: AAA

Weiss Ratings Inc.
4176 Burns Road
Palm Beach Gardens, Florida 33410
Extensive reports, insurance company ratings, and studies on life insurance companies including “shopper’s guides” and “consumer guides.”
Top Rating: A+

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