Property & Casualty Insurance Exam (National Portion)Producers and AdjustersEasy
An insurance producer receives an email from a client requesting to cancel their homeowner's policy immediately. The producer responds by email, confirming receipt and processing the cancellation. Which type of authority is the producer exercising by canceling the policy based on this client request?
- AExpress authority
- BOstensible authority
- CApparent authority
- DImplied authority
Show answer & explanationAnswer & explanation
Correct answer: A. Express authority
Express authority refers to the direct, explicit powers granted to an agent by their principal (the insurer), often in a written contract. Processing cancellations is typically a clearly defined duty within an agency agreement.
Why the other options are wrong
- B. Ostensible authority is another term for apparent authority.
- C. Apparent authority arises when the insurer's actions lead a third party (the client) to reasonably believe the agent has authority, even if not explicitly granted.
- D. Implied authority is not explicitly granted but is necessary to carry out express authority.
Express Authority
The explicit, clearly defined powers and duties granted to an insurance agent by their principal (the insurer), typically in a written agency agreement.
- Directly stated and documented.
- Forms the foundation of the agent-principal relationship.
- Includes specific tasks like binding coverage, collecting premiums, and processing cancellations.
Memory trick: Express is 'EXplicitly' written down.