Georgia Property & Casualty Practice Exam

Which type of agent authority appears to be granted by the insurer based on the producer's actions or statements?

1. Express authority

2. Apparent authority

3. Implied authority

4. Illegal authority

The correct answer is: Apparent authority

Apparent authority is the type of agent authority that emerges from the actions or statements of the producer, creating an impression to third parties that the agent has the authority to act on behalf of the insurer. This occurs when an agent's behavior leads others to reasonably believe that they possess the authority to make decisions or take actions that affect the insurer. In many cases, this authority is inferred from the conduct or representations made by the agent, even if such authority has not been formally documented or explicitly stated by the insurer. For example, if an insurance producer consistently provides quotes, binds coverage, or makes promises about policy details that appear to be authorized by the insurer, third parties may consider those actions as grounds for assuming the producer has the authority to act on the insurer's behalf. This concept is crucial in maintaining trust and confidence in insurance transactions, as it protects the expectations of clients who interact with agents. Apparent authority helps ensure that producers can engage in so-called agency actions without fear of the insurer later denying such authority, provided those actions created a reasonable belief of authority.