Which of the following best describes the challenge of the independent agency system?

The challenge of the independent agency system is centered around intense competition among agencies. Independent agencies are often competing for the same pool of clients, which can lead to price wars and pressure to differentiate services and offerings. This competition is particularly pronounced because independent agents typically represent multiple insurers, giving them the flexibility to offer numerous products but also creating a scenario where they must constantly prove their value to clients in a crowded market.

In this environment, independent agencies may struggle to maintain consistent client relationships, as policyholders may switch agencies for better rates or service. This ongoing competition requires agencies to invest in marketing, customer service, and other strategies to attract and retain clientele, ultimately defining the nature of their operations and strategic focus.

Other factors such as high costs from fixed salaries or limited product choices are not inherently defining characteristics of the independent agency system. Agencies can adjust their staffing models, and the diversity of products available through multiple insurers often enhances, rather than limits, choices for the agents and their clients. Therefore, the essence of the challenge lies in navigating through competition rather than operational costs or product availability.