Insurance Agents and Producers

Broker

A licensed individual who negotiates insurance contracts with insurers, on behalf of the applicant. A Broker represents the applicant or insured's interests, not the insurer, and thus does not have legal authority to bind the insurer. A broker's license is not applicable in all states.

Producer

A person or agency appointed by an insurance company to represent it and to present policies on its behalf. A producer possesses three types of authority: Express/ Implied/ Apparent.

Producer's Responsibilities to the Insurer

1. Fiduciary duty to the insurer in all respects, especially when handling premium funds. 2. Must keep premium funds in a trust account separate from other funds and forward to insurer promptly. 3. Must report any material facts that may affect underwriting. 4. Responsible for soliciting, negotiating, selling, and cancelling the insurance policies with the insurer. 5. Duty to only recommend the purchase of suitable policies.

Producer's responsibilities to insurance Applicant or Insured

1. Forward premiums to insurer on a timely basis. 2. Seek and gain knowledge of the applicant's insurance needs. 3. Review and evaluate the applicant's current insurance coverage, limits and risks. 4. Serve the best interests of the applicant or insured, although producers represent the insurer. 5. Recommend coverage that best protects the insured from possible loss and NOT the most profitable coverage from the perspective of the producer.

Law of Agency

A relationship between two or more parties where one party (the agent or producer) acts on behalf of the other party, known as the principal or insurer. The agent or producer binds the actions and words of the principal.

Apparent

Authority created when the producer exceeds the authority expressed in the agency contract. This occurs when the insurer does nothing to counter the public impression that such authority exists. An example would be the producer's acceptance of premiums on a lapsed policy.

Express

Authority that is written into the producer's agency contract. An example would be the producers binding authority if written in the contract.

Implied

Authority the public assumes the producer has. An example would be the business activities of providing quotes,completing applications and accepting premiums on behalf of the insurer.

Insurer (principal)

The Insurer is the source of authority from which the producer must abide; and it is responsible for all acts of a producer, but only when the producer is acting within the scope of his/her authority. However, a producer may be personally liable when his/her actions exceed the authority of the agency's contract.