Chapter Two: Agents and Agency

This employee cannot bind life and health insurance and works for the insurer:

Agent Agents represent and work for the insurer. Unlike property and casualty agents, life and health agents cannot bind coverage.

Which of the following statements is true?

Brokers always represent the insured Agents always represent the insurer. Brokers represent the insured.

All of the following are responsibilities the agent has to the insured, EXCEPT:

Commingle premiums with personal funds Insurance agents have a responsibility to act in a professional and ethical way to applicants and insureds. Agents are required to uphold a fiduciary trust with respect to their applicants and insureds. This means that agents must handle the premiums collected from applicants and insureds in a position of financial trust. Agents must not commingle premiums with their personal funds. Agents who engage in embezzlement of funds have violated their agency contract and are legally guilty of fraud and theft.

An agent's statements made to an insured are considered to be:

Implied authority Implied authority is that which is conveyed to the insured by the agent's statements and duties.

If Joan's agency contract does not specifically state that she can collect premiums and then forward them to the insurer, this represents:

Implied authority Implied authority is not specifically expressed by the principal to the agent and is implicit in the agent's duties. Collecting premiums and forwarding them to the insurer is an example of the agent's implied authority.

The authority to bind coverage is given to:

Property and casualty agents Life and health insurance producers do not have binding authority, while some property and casualty agents do.

The _________ is the principal in the agent-insurer relationship.

Insurer The law of agency states that the insurer is the principal in the agent-insurer relationship.

Jerry is able to bind coverage. This means that he is probably:

A property and casualty agent Life and health insurance producers do not have binding authority, while some property and casualty agents do.

All of the following are false statements regarding authority of insurers, EXCEPT:

A license, called a certificate of authority, must be held by all insurers intending to transact insurance in a jurisdiction unless they are exempt as excess and surplus lines insurers. In order to sell insurance in a state, insurers must receive a license from that state's department of insurance. The license, called a certificate of authority, authorizes an insurer to sell insurance for particular lines (i.e., life, health, property, casualty, etc.) Authorized insurers are also referred to as admitted or licensed insurers.

The _________ represents the insurer. The __________ represents the insured.

Agent, Broker Agents always represent the insurer. Brokers represent the insured.

Which of the following statements is true pertaining situations involving errors and/or omissions?

All of the statements are true when pertaining to errors and omissions situations for the producer. Producer should document all conversations. Producer can purchase Errors and Omissions coverage. The insurer will defend the producer against lawsuits the policy covers.

When insurance agent Jake uses the insurance company's logo and letterhead for sales presentations and letters to his clients, this is which type of authority?

Apparent Apparent authority is the customers_ perception of the agent's authority based on the relationship between the insurer and the agent.

Daniel was purchasing a life policy from his friend Marcus, an agent for MMC Agency. Even though Daniel had not yet paid a premium, Marcus told him that the policy was in force as of the date that they wrote the contract. Marcus did not have the authority to bind coverage immediately, but the MMC Agency could still be liable. This is an example of:

Apparent Authority If Daniel can reasonably assume that Marcus has the authority to bind coverage, the agency could be liable because it is considered apparent authority. Daniel believed that Marcus had the authority to bind coverage.

Insurance agent Sam uses the insurance company's logo and letterhead for sales presentations and letters to his clients. This is an example of:

Apparent authority Apparent authority is the authority an agent is perceived to have based on the relationship between the insurer and the agent, and the customers' perception of the agent's authority.

Which of the following best characterizes express authority?

It is explicitly granted to the agent in the agency contract Express authority is granted by an insurer to an agent in the agency contract.

Insurer XYZ has written an agency contract for Yuri to act as an agent. What type of authority is described here?

Express Express authority is the explicit authority granted to the agent by the principal as written in the agency contract.

Sam's agency contract does not specifically state that he can collect premiums and then remit them to the insurer. This is an example of:

Implied authority Implied authority is not specifically expressed by the principal to the agent in the agency contract, but is implicit in the agent's duties. Collecting premiums to be forwarded onto the insurer is an example of the agent's implied authority.

Janice has received a contract from the agency she plans to work for. The contract defines the agreement in very explicit terms. Signing the contract will allow her to represent the agency. This is an example of:

Express authority The contract with details the terms of the agreement between Janice and the agency is an example of express authority. Implied authority is not expressly detailed in a contract, but can be implied in the general conduct of business for an agent _ i.e. sharing marketing materials, collecting premiums, etc. Apparent authority is what the agent seems to have when certain tasks, duties are undertaken _ and are normal duties. Sometimes details of apparent authority can be misleading and convince an insured that an agent has authority that he/she really does not have.

Which of the followings statements correctly identifies the law of agency?

The insurer is principal and the acts of the agent are deemed acts of the insurer. The law of agency states that the acts of an insurance agent are deemed the acts of the insurer.

Mrs. Conroe's policy lapsed. Her agent, Mrs. Acker, accepted her past due premiums and re-instated Mrs. Conroe's policy. This is an example of apparent authority because agents cannot usually reinstate policies. However, in this case, it was allowed. Why?

Mrs. Acker was allowed to accept late premiums in the past to reinstate policies. Because the insurance company allowed Mrs. Acker to accept late premiums in the past for the purpose of reinstating a policy, they allowed it in this case. Because of the history, a court would rule that Mrs. Acker was acting within the scope of her responsibility.