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.