When an insurer sells policies directly to consumers by mail, telephone, or the internet without the involvement of a local agent, this distribution method is called:

Why A is correct

Direct response marketing is the distribution method in which the insurer communicates with consumers directly through mail, telephone, the internet, or other media, and the consumer applies without meeting a local agent. The agency system relies on licensed agents to sell and service policies in person. Each distribution system has different implications for consumer guidance, service, and how the product is presented, and consumers should understand who is available to help them if they have questions after the sale.

Why the other options are wrong

• B) The agency system involves licensed agents selling and servicing policies. The direct response model does not use local agents. The agency system uses licensed agents to sell and service policies in person, which direct response avoids.
• C) Brokerage arrangements involve intermediaries placing business on the client's behalf. This is not direct consumer contact. A brokerage arrangement places coverage through an intermediary on the client's behalf, not by direct contact.
• D) A reciprocal exchange is a type of insurer owned by its subscribers. It is not a distribution method. A reciprocal exchange is an insurer owned by its subscribers, which is a company structure, not a distribution channel.

Memory hook

Direct response = no human in the room. The mailbox and the modem are the sales force.