2.3.2 Fiduciary Responsibilities
Since the agent is licensed by the state and employed by the principal, the agent's business conduct is subject to scrutiny by both entities. He is expected to maintain the highest level of trust and ethical conduct for both parties as well as for the customer he/she services. The agent thus becomes a fiduciary, an individual whose position or responsibility is dependent upon public trust and confidence.
When the agent acts as a fiduciary, this means that he/she has a relationship of confidence and trust with the client; is trustworthy and reliable. When an agent enters into a contractual agreement with a principal, both have agreed to a mutually beneficial relationship. Acting as a fiduciary basically follows much of the same principles as the scouting organizations we're all familiar with, such as Boy Scouts and Girl Scouts, only tailor-made for the insurance industry.
- Be fit and proper.
- Be honest and trustworthy.
- Have a good business reputation.
- Be qualified to perform insurance functions.
- Have knowledge of, and abide by, state laws and regulations.
- Act in good faith.
Fiduciary responsibility is typically associated with the trustworthiness of the agent handling money.
What are the agent's fiduciary responsibilities?
Definition of Fiduciary: - "A person to whom property or power is entrusted for the benefit of another."
Under the law of agency, an agent is the lawful representative of the principal, which in this case is the insurance company. Thus, the payment of premiums or other sums to the agent is the same as paying them to the insurance company. Because of this, the agent has a fiduciary responsibility to turn the funds over to the insurance company immediately, and not to use them for his or her own purposes.
