The organization of these functions usually depends on the size of the company, but in almost every situation, distribution is a line function and all the other functions are staff functions. In the largest companies all functions are separated into individual departments with all the staff functions often reporting to a marketing services officer or to individual department heads, who in turn report to a chief marketing officer who has overall responsibility for marketing.

The title "chief marketing officer" is a generic one describing the function of the job. The actual title of this individual differs from company to company and includes such titles as senior vice president/marketing, vice president/sales, or agency vice president. In a very small company all marketing functions might be under the direct control of the chief marketing officer. For companies of any size, however, a number of variations exist regarding how marketing functions are structured.

For example, many companies sell more than one product line, marketing all or several of the following: individual life and health, group life and health, individual and group pensions, property and casualty insurance, and equities. In such cases a company might have separate marketing departments for each product line, each with its own individual staff functions and chief marketing officer. On the other hand, a company might choose to have just one marketing department for all product lines, with each product line operating as an individual subdepartment.

These are the most common organizational arrangements in the life insurance business but other approaches do exist, including organizing the marketing department by the markets the company serves, by the geographic regions in which it operates, or by the different distribution systems it employs. A combination of these organizational structures (or parts of each) results in many possible variations for each basic structure.

Regardless of how a company�s marketing structure is organized, all the staff functions exist for a single purpose�to aid distribution. A life insurance company must have a continuing, incoming flow of new profitable revenue, and the most effective and efficient way to do this is through the distribution of its products, or to use Drucker�s terminology, by creating and keeping customers. Theoretically there are many ways of doing this since a life insurance company�s products can be�and are in fact�sold the same ways in which any product can be sold, from vending machines in airports to direct solicitations in the mail. But one way has proven to be far more successful than any other, and that is personal solicitation by a commissioned individual in a face-to-face sales situation.

The first companies to sell life insurance in the United States had no agents. They sold only a small number of life insurance policies each year, and it seemed as if the business would never achieve any notable success. But in 1842 the directors of the Mutual Life Insurance of New York made a decision to appoint soliciting agents to sell their product, and the business has never been the same. J. Owen Stalson in his classic, Marketing Life Insurance, writes as follows:

Those words, written more than 50 years ago about an event that happened more than 150 years ago, are as true today as they were then. As measured by new life premiums, 99 percent of all individual life insurance is sold by an individual producer, and only one percent is sold without an individual producer�s involvement. This is true despite all the money and effort that have been spent in recent years on the development and implementation of mass marketing approaches, such as marketing through credit cards, associations, lending firms, and direct mail.

From the company�s point of view, therefore, the need for a field organization of individual producers is obvious because of the volume and growth in business that is generated, bringing stability and economies of scale. However, the need for individual producers is not just a matter of securing the largest amount of new business. The need arises also from companies� social duty to provide adequate life insurance protection for all who need it and therefore to perform in the greatest possible degree the function for which they are organized.

The use of individual producers is often unfairly criticized because the commissions and other remuneration paid to producers are perceived as unnecessarily increasing the cost of life insurance to policyowners. Such criticisms generally assume that the cost is a direct expense to policyowners for which they receive no compensating benefit. This is an unwarranted assumption. Even if the producer did no more than call the prospect�s attention to the need for insurance and explain its benefits, the producer would still be rendering a considerable service of material value. Most producers do much more than that today. They render many types of services that would not be available if there were no producers, not the least of which is advice and recommendations about what product is best. Any comparison of the relative costs of life insurance that does not take into account the differences in the services rendered is misleading.

Since consumers in the general public rarely apply for life insurance (irrespective of the obvious need for it) until they are solicited, producers perform an important service merely by calling attention to the need for protection and by persuading prospects to apply for it. Good producers also analyze applicants� needs and advise them about the most suitable types of policies, the amounts of protection required, the cost and method of premium payment, the more important provisions of the contract, the optional ways benefits can be paid, and the appropriate choice of and rights regarding a beneficiary. If prospects own a number of policies, the good producer will make suggestions for coordinating these policies with governmental and employer-supplied benefits to create a total plan for financial protection against all risks.

Good agents, in their advisory role, will also explain how life insurance can be used in many, many creative ways to achieve desired aims in such diverse areas as funding education, relieving tax burdens, continuing businesses, supplementing social security, paying off obligations, dissolving partnerships equitably, enhancing credit, financing business buy-sell agreements, canceling mortgages, and funding pensions.

The work of good producers does not end with the sale and the delivery of the policy. Life insurance needs are not static but require frequent review and adjustment to meet changing conditions. This is particularly true of beneficiary provisions. Therefore the relationship established by a producer with a client is a long and mutually beneficial one.

The geographic area in which a life insurance company can sell varies from a single state to the entire world. Regardless of how big the area is, a company must be able to exert some control over its distribution system while at the same time providing support services to the system. In the smallest company, one operating in a limited geographic area, the chief marketing officer and a small staff in the home office marketing department can provide this control and support. However, it is much more common for a company to be active over a very large area and to have a very large marketing department that operates in a very hierarchial organizational structure.

Under the chief marketing officer there are a number of layers of subordinates�depending on the size and complexity of the company�s operation�with decreasing amounts of authority. The lowest tier, usually located in a geographic region of the country, controls and supports a specified number of field outlets. If that sounds obscure, that�s because it is; the different combinations of contractual and reporting relationships between the field and the home office can be counted in the hundreds.