2/A - The Agent and Authority Flashcards
Agent
One who receives the authority to act on behalf of someone else
- Sales Agent: receives authority to sell
- Insurance Adjuster: receives authority to settle claims brought against the insurer
Agent’s Authority
Agents receive authority by written contract.
Sales agents: contracted to sell and service insurance policies on behalf of the insurer
Adjusters: contracted to settle claims that arise against the insurer
Power to Bind
An agent’s authority can bind.
- What the agent says or does can bind the insurer
- Agents should take the utmost care in what they say and do
- Even if the agent makes mistakes, the insurer may have to accept them
Responsibilities
Three major responsibilities of contracted agents:
- Adhere to or follow the contract
- Use reasonable judgment and care at all times
- Provide all necessary information and documentation to the insurer
Types of Authority
- Express Authority
- Implied Authority
- Apparent Authority
Express Authority
Authority that is directly granted to the agent in writing via the agent’s contract.
Agents usually have express authority to:
- Sell policies
- Collect premiums
- Issue binders
- Offer discounts (such as multi-policy discounts)
- Cancel insurance
Implied Authority
The authority that the public reasonably believes the agent to have, based on the agent’s representations
These representations include:
- Portraying oneself as a representative
- Wearing a name tag with company logo
- Handing out company business cards
- Words and actions that go “hand in hand” with express authority and are usual in order to perform an agent’s duties
Apparent Authority
Indirect authority that is granted when the insurer does not correct its agent, even though the agent may be acting in error
- Granted when the insurer does not act
- By not correcting the agent, the insurer implies consent
Types of Sales Agents
The Four Types of Sales Agents:
- Independent Insurance Sales Agent
- Exclusive Agent
- General Agent
- Direct Writer
Independent
Independent Insurance Sales Agent:
- Self-employed
- Offer insurance from more than one company at the same time
- They can compare and give rate quotes from different companies
- Find a policy that best suits the customer
Exclusive
Exclusive Agent:
- Also called Captive Agent
- Commissioned
- Represents only one insurer and only their policies
General
General Agent:
- Works for one insurance company
- Supervises other exclusive agents
- Trains other agents
Direct Writer
- Salaried Employee
- Works for only one company
Summary of Agents
Independent Agent: works for many insurers at once; sells insurance products from many insurers; commission
Exclusive Agent/Captive Agent: works for one insurer; mainly sells employer’s insurance products; commission
General Agent: works for one insurer; trains agents for employer; salary
Direct Writer: works for one insurer; sells employer’s insurance products; salary
Sales Agent’s Activities
Sales Agent’s Day to Day Activities:
- sell insurance policies
- service policyholders’ contracts
- collect the premiums
- represent the insurer
