Which statement about the direct response distribution channel to market insurance is true?

Which statement about the direct response distribution channel to market insurance is true?

• A. It relies heavily on a broad network of independent agents.
• B. It often offers lower distribution costs because no agents are involved.
• C. It is suitable primarily for complex commercial risks.
• D. It ensures high levels of personalized service and advice.

Answer: (B)

Direct response means selling insurance directly to customers without intermediaries, using channels like insurer websites, call centers, or direct mail. Because there are no commissions paid to agents, distribution costs are typically lower, which can lead to lower premiums or higher margins for the insurer. This approach fits straightforward, standardized products where customers can self-serve or obtain information without personalized guidance. It’s less suited for complex commercial risks that require detailed underwriting and tailored advice, and it generally offers less personalized service than channels that rely on agents. So the statement about lower distribution costs due to the absence of agents is the best fit.

Direct response means selling insurance directly to customers without intermediaries, using channels like insurer websites, call centers, or direct mail. Because there are no commissions paid to agents, distribution costs are typically lower, which can lead to lower premiums or higher margins for the insurer. This approach fits straightforward, standardized products where customers can self-serve or obtain information without personalized guidance. It’s less suited for complex commercial risks that require detailed underwriting and tailored advice, and it generally offers less personalized service than channels that rely on agents. So the statement about lower distribution costs due to the absence of agents is the best fit.