Georgia Property & Casualty Practice Exam

What type of authority does Diane have when collecting insurance premiums as per her agency agreement?

1. Apparent authority

2. Implied authority

3. Inherent authority

4. Express authority

The correct answer is: Express authority

Diane possesses express authority when collecting insurance premiums as per her agency agreement. Express authority refers to the powers explicitly granted to an agent by the principal in a formal agreement. In this case, the agency agreement would specifically outline that Diane is authorized to collect premiums on behalf of the insurance company. Having this written or verbal agreement clearly delineates her responsibilities and powers, ensuring that any actions she takes, including collecting premiums, are recognized as legitimate and binding within the context of her role as an agent. The clarity and specificity of express authority are crucial, as they provide both the agent and the principal with a clear understanding of what actions the agent can take. Collector roles are often part of the duties designated within agency agreements, reinforcing the understanding that agents like Diane are expected to handle certain transactions directly related to their agency's operations. This helps to establish trust with clients and outlines clear guidelines for the conduct of business. In contrast, other forms of authority, such as apparent, implied, and inherent authority, do not rely on explicit instructions from the principal and can lead to ambiguity about what an agent is allowed to do. Apparent authority arises when a third party reasonably believes the agent has the authority to act on behalf of the principal, while implied authority involves