General Insurance Principles - Insurance Producers

Question 1

Agent

Answer 1

An individual legally considered a representative of the insurer that employs them.

Question 2

Broker

Answer 2

An individual representing an insurance applicant, not the insurer.

Question 3

Common Law Rules of Agency

Answer 3

A relationship between two parties that involves a principal and an agent. The principle is the party on whose behalf the agent acts. With insurance, the insurer is the principle and the agent or broker is the agent.

Question 4

Career (Captive) Agency System

Answer 4

A company employs agents under the supervisions of a general agent or agency manager.

Question 5

Independent Insurance Broker

Answer 5

An insurance professional who represents multiple insurers.

Question 6

Fiduciary Responsibility

Answer 6

A fiduciary relationship exists when one party handles money or other property on behalf of another. Out of this relationship comes the producer’s fiduciary duty to act in the best interests of the insurer. A producers also has a fiduciary responsibility to customers and should act in good faith and with integrity.

Question 7

Agents’ Powers of Authority

Answer 7

1. ) Expressed Authority
2. ) Implied Authority
3. ) Apparent Authority

Question 8

Express Authority

Answer 8

The contract between the producer and insurer sets forth certain acts and duties the producer is specifically authorized to perform. This authority is express authority.

Question 9

Implied Authority

Answer 9

Not all of the activities that an agent normally performs are expressly stated in the agent’s contract. For the sake of effective business, insurers allow their producers to engage in many sales-related activities not expressly listed in any agreement. This is implied authority.

An agent’s authority is implied when it

1.) Is intended to be given by the insurer;
2,) Usually relates to the general customs of the business; and
3.) Is not contractually provided or specifically explained.

Question 10

Apparent Authority

Answer 10

Apparent authority is the third type of authority that an agent can assume. It is authority that

1. ) The contract does not provide;
2. ) The insurer does not intend; yet
3. ) Reasonably appears to the customer to be granted to the agent based on the agent’s statements and the actions (or inactions) of the insurer.

Question 11

Buyer’s Guide

Answer 11

Document that explains the general features, benefits, and conditions of the type of insurance an application is considering.

Question 12

Policy Summary

Answer 12

Document that provides detailed information about the specific policy that is being purchased.

Question 13

Cost Index

Answer 13

A way to measure the relative costs of an insurance policy in relation to other policies by using the factors of premiums, cash value, and policy dividends.

Question 14

Life Insurance Surrender Cost Index

Answer 14

Compares costs at a future date when the policy might be surrendered for cash value.

Question 15

Life Insurance Net Payment Cost Index

Answer 15

Compares costs at a future date if premiums are continually paid and no cash value is withdrawn.