PSI Ohio Insurance Practice Exam

What type of authority is documented and allows a producer to act on behalf of the insurer?

1. Implied authority

2. Express authority

3. Assumed authority

4. Constructive authority

The correct answer is: Express authority

Express authority refers to the explicit power granted to an insurance producer by the insurer, often documented through a contract or agency agreement. This authority allows the producer to perform specific actions as defined by the insurer, such as soliciting applications, collecting premiums, and binding coverage. Because express authority is formally documented, it provides clarity and legal standing to the actions taken by the producer, ensuring that they can operate within the parameters set by the insurer. This distinct type of authority is crucial, as it helps maintain compliance with regulatory standards and protects both the insurer and the producer in their business dealings. Other forms of authority, like implied authority, are based on the producer’s actions and the expectations of their role but lack formal documentation. Assumed and constructive authority are not standard terms used in the context of insurance authority, making express authority the most accurate and appropriate choice in this scenario.