Ethics and California Insurance Code —General Insurance© TesTeachers Publishing –www.TesTeachers.com7C.The Insurance Marketplace1.Distribution Systemsa.Be able to identify a definition of the following marketing systems:i.AgencyAn agencyrelationship is one in which a person is authorized to represent and act for another person or corporation. An agent or producer is a person who is authorized to act on behalf of another party, individual or corporation, who is known as the principal. Theprincipal is responsible for the acts of its agents.Agents or producers may be either independent or exclusive (captive). An independent producer enters into an agency agreement with one or more insurers in order to search the market for the best company and products suited to his or her customer’s individual needs. Independent producers are usually self-employed independent contractors who own their customer accounts and pay all their expenses out of commissions earned.Exclusive or captive agents or producers represent a single insurer and are obligated to submit business only to that company. Companies usually provide their exclusive agents with training, a salary and employee benefits. Captive or exclusive agents do not owntheir customer accounts. ii.Direct responseInsurers who utilize the direct responsemarketing system sell insurance directly to insureds through their own employees, through the mail or via the internet. Insurers use this method of distribution rather than exclusive or independent agents for effectiveness and efficiency.iii.Home serviceInsurers who utilize the home servicemarketing system employ agents or producers to sell industrial life insurance on which a premium is usually collected on a weekly basis at the home of the policyholder.2.ProducersInsurance companies market their products generally by using producers to sell their products or by selling directly through direct response marketing. The majority of policies are sold through producers.a.Be able to identify the Code definition of “transact”an