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General agency distribution system
Along with the branch office system, the general
agency distribution system is part of the agency
system, which is the most common system used to
sell individual life insurance products. Under the
general agency system, each field office is headed
by a general agent, who is an independent entrepreneur
under contract to the insurer. As an independent
entrepreneur, the general agent has a great deal
of control over how the field office is to operate.
Typically, the staff of the field office is employed
by the general agent, not the insurer; salaries
and office expenses are paid by the general agent,
not the insurer; and the soliciting agents are under
contract to the general agent, not the insurer.
In a traditional general agency system, all commissions
from the insurer are paid to the general agent.
The general agent keeps a portion of each commission,
called an overriding commission, and then pays the
remaining commission to the appropriate soliciting
agent. Some insurers have modified this procedure
and now pay commissions directly to soliciting agents
and overriding commissions directly to general agents. |
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