Property and Casualty Insurance Practice Exam

What allows an agent to perform usual tasks associated with selling insurance?

1. Express Authority

2. Apparent Authority

3. Implied Authority

4. General Rule of Agency

The correct answer is: Implied Authority

The correct answer, which is implied authority, refers to the powers that an insurance agent is assumed to have, even if they are not explicitly stated in their agency agreement. This authority is based on the actions and conduct of the agent that demonstrate to the public that they have the power to perform specific tasks associated with selling insurance. For instance, an agent may not have a written directive to underwrite policies or negotiate specific terms, yet it is generally understood in the business context that they can make these decisions as part of their role. Implied authority enables agents to conduct routine activities necessary for the sale of policies, such as collecting premiums, issuing receipts, and providing information to clients. Other options like express authority refer to the specific powers given directly through a contract, while apparent authority involves situations where a third party perceives that an agent has authority based on the principal's representations. The general rule of agency describes the overall relationship and responsibilities, without delving into the nuanced powers typically derived from implied authority.