When an insurer appoints an agent to serve as its representative, what specifies the scope of authority for the agent?

When an insurer appoints an agent to serve as its representative, what specifies the scope of authority for the agent?

• A. a policy
• B. an agency contract
• C. an endorsement
• D. a binder

Answer: (B)

The scope of an agent’s authority is defined by the agency contract (agency agreement) between the insurer and the agent. This contract spells out what the agent can do on behalf of the insurer, including what actions they may take (such as soliciting risks, binding coverage, issuing policies, collecting premiums) and any limits or conditions. The policy itself is the contract with the insured, not a description of the agent’s authority. Endorsements modify the policy terms, and a binder is a temporary instrument used to provide immediate coverage while a policy is being issued, not a general statement of the agent’s authority. So the agency contract precisely sets the agent’s scope of authority.

The scope of an agent’s authority is defined by the agency contract (agency agreement) between the insurer and the agent. This contract spells out what the agent can do on behalf of the insurer, including what actions they may take (such as soliciting risks, binding coverage, issuing policies, collecting premiums) and any limits or conditions. The policy itself is the contract with the insured, not a description of the agent’s authority. Endorsements modify the policy terms, and a binder is a temporary instrument used to provide immediate coverage while a policy is being issued, not a general statement of the agent’s authority. So the agency contract precisely sets the agent’s scope of authority.