2.3.1 Agent Authority
There are three different ways in which the insurer authorizes the agent to represent it.
Express Authority
Express authority is the authority that an agent has in writing in the contract with the insurer that the agent represents.
Express authority spells out in contract form the activities that the agent has the power to perform on behalf of the insurer. It is established through either verbal or written communication and details the agent's ability to solicit, initiate applications, and collect initial premiums when acting on behalf of the principal.
Implied Authority
Implied authority is authority that is given not in writing but that is necessary for the agent to transact insurance.
Implied authority is conjecture that even though certain functions are not spelled out in contract form, the agent still retains the authority; for instance, using the company stationery or logo for business purposes. Implied authority is established through verbalization and occurs when appropriate actions are taken to carry out the authority granted to an agent in order to fulfill the principal's goals.
Apparent Authority
Apparent authority is authority a third party is led to believe and that the agent is given due to the agent's actions.
Apparent authority is the appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent, such as company advertising material. This type of authority occurs when a principal permits an agent to act on its behalf without either expressed or implied authority.
The agent's authority is in most cases limited and even though he may make decisions on behalf of the principal, often these decisions have limitations and are subject to the principal's review.
