What is a defining characteristic of the General Agency System?

The defining characteristic of the General Agency System is that agents may be managed by contractors. This system is designed to provide insurers with a way to distribute their products through independent agents, who operate under the authority of a general agent. In this arrangement, the general agent oversees the agents and can contract with and manage multiple agents, which allows for a broader reach in marketing and selling insurance products.

In this model, the general agent also has the authority to represent the insurer, ensuring that they can effectively manage and support the agents beneath them. This contractual relationship provides flexibility and can foster entrepreneurial activity within the insurance market.

Other options such as agents being employees of the insurer or having to work exclusively with one insurer do not accurately describe the nature of the general agency system, as it is specifically designed to allow for independence and a wider range of options for agents and consumers alike. Additionally, agents do earn commissions; thus, the notion that they do not earn commissions does not align with the typical compensation structure in this system.