An insurer markets life insurance directly to consumers through mail and the internet, with no agents involved in the sale. This distribution system is called:

Why A is correct

Direct response marketing is the distribution system in which the insurer sells insurance to consumers through the mail, telephone, internet, or other media without relying on agents to solicit and place the business. The consumer responds directly to the insurer. This contrasts with the agency system, in which licensed agents represent the insurer and interact personally with applicants. Direct response sales have particular regulatory considerations, such as disclosure and suitability rules designed to protect consumers who buy without agent guidance, and insurers using direct response methods may structure compensation and training differently because no agent is involved in the individual sale.

Why the other options are wrong

• B) The independent agency system uses independent agents who represent the insurer and sell through personal, face-to-face contact; it is the opposite of selling through the mail or internet without agents.
• C) A general agency is an arrangement in which an agent or agency has authority to appoint and manage subagents and to place business for the insurer, not a direct consumer marketing channel.
• D) Fraternal distribution refers to insurance sold through fraternal benefit societies to their own members, who share a common bond; it is not direct consumer marketing. In fraternal distribution the society's members are both the market and the insured group, which is fundamentally different from mass-market direct response selling.

Memory hook

Direct response = no middleman; the mailbox and the modem do the selling.