Life & Health Insurance Exam (National Portion)General InsuranceMedium
A producer receives a commission for placing a client's insurance policy. This is an example of what type of authority?
- AExpress authority
- BApparent authority
- CFiduciary authority
- DImplied authority
Show answer & explanationAnswer & explanation
Correct answer: D. Implied authority
Implied authority refers to the unwritten authority that a producer is assumed to have to transact insurance business, such as receiving commissions or collecting premiums, which are necessary to conduct the business for which they are appointed.
Why the other options are wrong
- A. Express authority is explicitly written or stated in the agency agreement.
- B. Apparent authority is created when a third party believes the agent has authority based on the insurer's actions.
- C. Fiduciary authority relates to handling client funds responsibly, not earning commissions.
Producer Authority
Producers (agents) have different types of authority granted by their insurers: Express, Implied, and Apparent.
- Express: Written in contract.
- Implied: Assumed to carry out express authority.
- Apparent: Perceived by others due to insurer's actions.
Memory trick: E.I.A. - Express, Implied, Apparent