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Authority of Agents

Insurance agents generally have three types of authorities to transact business on behalf of the insurers: -

· Express Authority

· Implied Authority

· Apparent Authority

Express Authority is the authority that the principal specifically grants to the agent to sell the insurance company’s product or that the agent has the authority to bind coverage upto a specified limit. Binding authority is generally granted to the agent in the agency contract and thus is a form of express authority.

Binding Authority is a power to make insurance coverage effective on behalf of the insurer; binding coverage is usually accomplished by issuing binders.

A Binder, which can be either written or oral, is a temporary contract between the insurance company and the insured that makes insurance coverage effective.

Implied Authority is the authority that arises from actions of the agent that are in accord with the accepted custom and that are considered to be within the scope of authority granted by the principal, eventhough such authority is not expressly granted orally or in agency contract.

Apparent Authority is the authority based on the Third Party’s reasonable belief that an agent has authority to act on behalf of the Principal.