Producers and General Rules of Agency

Producer

An individual licensed to sell, solicit, or negotiate insurance contracts on behalf of the principal (insurer). Considered an agent of the insurer.

Law of agency

Defines the relationship between the principal and the producer: the acts of the agent within the scope of authority are deemed to be the acts of the insurer.

Express authority

The authority a principal intends to grant to an agent by means of the agent’s contract. It is the authority that is written in the contract.

Implied authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal. Incidental to and derives from express authority since not every single detail of an agent’s authority can be spelled out in the written contract.

Apparent authority (perceived authority)

The appearance, or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Fiduciary responsibility

Although the agents act for the insurer, they are legally obligated to treat applicants and insureds in an ethical manner. Someone in a position of trust. More specifically, it is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

Code of ethics

Producers must adhere to certain established procedures, and failure to comply will result in penalties.

Market conduct regulations

• Conflict of interest;

• A request of a gift or loan as a condition to complete business; and

• Supplying confidential information.

Professionalism

A person is engaged in an occupation requiring an advanced level of training, knowledge, or skill. Placing the public’s interest above one’s own in all situations.