PSI Ohio Insurance Practice Exam

What authority is NOT written and allows a producer to conduct the business of the insurer?

1. Express authority

2. Implied authority

3. Apparent authority

4. Assigned authority

The correct answer is: Implied authority

Implied authority refers to the authority that is not explicitly stated but is assumed based on the actions and position of the agent or producer within the insurance company. This type of authority allows the producer to act in ways necessary to conduct business effectively on behalf of the insurer, even if those specific actions are not detailed in a written agreement. For example, if a producer is responsible for fostering relationships with clients and negotiating terms, it is generally understood that they have the implied authority to make certain decisions and commitments that facilitate those activities. This authority arises from the producer's role and the reasonable expectations of clients and other stakeholders, rather than from a formal written agreement. In contrast, express authority is explicitly granted through written contracts, while apparent authority arises from the perception of third parties regarding what the producer is authorized to do, based on the actions of the principal (the insurer). Assigned authority is not a standard term used in this context. Therefore, identifying implied authority as the type that is not written but allows a producer to conduct business aligns perfectly with its definition and practical application in the insurance industry.