Chapter 1 (Producers and General Rules of Agency)

Question 1

An agent/producer is an individual licensed to sell, solicit or negotiate insurance contracts on behalf of the ____________

Answer 1

principal (insurer).

Question 2

___________ defines the relationship between the principal and the agent/producer: the acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer.

Answer 2

law of agency

Question 3

What are some characterics of the law of agency?

Answer 3

1. An agent represents the insurer, not the insured;
2. Any knowledge of the agent is presumed to be knowledge of the insurer;
3. If the agent is working within the conditions of his/her contract, the insurer is fully responsible; and
4. When the insured submits payment to the agent, it is the same as submitting a payment to the insurer.

Question 4

What are the 3 types of the agent authority?

Answer 4

1. Express
2. Implied
3. Apparent

Question 5

Express authority

Answer 5

is the authority a principal intends to grant to an agent by means of the agent’s contract (It is the authority that is written in the contract.)

Question 6

Implied authority

Answer 6

is authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal

Question 7

If the agency contract does not specifically authorize the agent to collect premiums and remit them to the insurer, but the agent routinely does so in the process of solicitation and delivery of policies, the agent has the _________ authority to collect and remit premiums. This is an example of what type of authority?

Answer 7

implied authority

Question 8

Apparent authority

Answer 8

is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Question 9

For example, if an agent uses insurer’s stationery when soliciting coverage, an applicant may believe that the agent is authorized to transact insurance on behalf of the insurer. This is an example of what type of authority?

Answer 9

Apparent authority

Question 10

Because an agent handles the funds of the insured and the insurer, he/she has ________ responsibility.

Answer 10

fiduciary

Question 11

A fiduciary

Answer 11

is someone in a position of trust. More specifically, it is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

Question 12

Market conduct

Answer 12

describes the way companies and producers should conduct their business. (It is a Code of Ethics for producers)

Question 13

Some of the market conduct regulations include what?

Answer 13

1. Conflict of interest;
2. A request of a gift or loan as a condition to complete business; and
3. Supplying confidential information.