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
insurers at once
from many insurers
Agents receive authority by:
The two basic types of insurance agent are:
contracted to sell and service insurance policies on behalf of the insurer
contracted to settle claims that arise against the insurer
An agent’s authority can bind what?
● 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
What the agent says or does on behalf of the insurer can bind the ______.
the agent should take the utmost care with his words and actions because the insurer may have to live with the agent’s decisions and mistakes.
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
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
Express authority example
Let’s say Sarah decides to visit her local XYZ Insurance office. She meets with Jack, who sells her a new automobile insurance policy.
Jack helps Sarah select all the coverages available with her new policy, collects a check from Sarah for her premium payment, and issues Sarah a binder.
Jack then explains that he can offer her a discount on her homeowners’ policy, because XYZ Insurance discounts premiums for consumers who package all their insurance needs with XYZ Insurance.
These are all examples of Jack’s express authority. Jack’s contract specifically grants, in writing, that he can sell policies, establish premiums within certain limits, and offer discounts for purchasing multiple insurance policies.
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
Implied Authority Example
If you’re wearing a name tag bearing the XYZ insurer logo, a member of the public assumes you are acting as a representative of XYZ Insurance. As a contracted agent of XYZ Insurance, your words and actions represent those of XYZ Insurance. When an agent of insurer XYZ says he can write you an insurance contract for $500, any member of the public will believe the agent because he acts as a representative of the company.
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
Apparent Authority Example 1
Let’s say an agent writes an insurance policy for automobile coverage on a Ferrari and takes a premium payment from the consumer.
However, in the agent’s contract with the insurer, he was expressly not allowed to write insurance contracts on exotic cars such as a Ferrari.
The insurer temporarily overlooks this fact, and cashes the premium check the client wrote for coverage on his Ferrari.
When the insurer cashes the premium check, it automatically grants apparent authority to the agent. And by cashing the premium check, the insurer has become complicit in the authority of the agent to grant an insurance contract for the Ferrari owner.
Apparent Authority Example 2
Now, let’s look at an example of apparent authority for the adjuster.
If an adjuster issues payment to a claimant for more than the claimant actually lost—such as classifying something of greater value when in reality it was of lesser value—the insurer still issues the check for the consumer.
The adjuster appears to have the authority because the check was issued.
This was a mistake but the insurer typically won’t make the consumer pay back the money simply because of an agent’s mistake.
The Four Types of Sales Agents:
- Independent Insurance Sales Agent
- Exclusive Agent
- General Agent
- Direct Writer
Independent Insurance Sales Agent:
● 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
- Works for many
- Sells insurance products
● Also called Captive Agent
● Represents only one insurer and only their policies
- Works for one insurer
- Mainly sells employer’s insurance products
● Works for one insurance company
● Supervises other exclusive agents
● Trains other agents
- Works for one insurer
- Trains agents for employer
● Salaried Employee
● Works for only one company
- Works for one insurer
- Sells employer’s insurance products
Sales Agent’s Day to Day Activities:
● Sell insurance policies
● Service policyholders’ contracts
● Collect the premiums
● Represent the insurer