Pennsylvania Life and Health Insurance Exam Practice Question
The authority of a producer to act on behalf of the insurer is known as
Correct Answer: B
Rationale: The law of agency defines the relationship where one party, the agent (producer), is authorized to act on behalf of another party, the principal (insurer). This legal framework establishes that the actions of the agent bind the principal in transactions.
Option A, the presumption of agency, refers to assumptions made about agency relationships but does not define the authority itself. Option C, producer authority, is a more informal term and lacks the legal specificity of the law of agency. Option D, a principal relationship, describes the connection between the insurer and producer but does not encompass the authority aspect. Thus, understanding the law of agency is crucial for recognizing the producer's role and responsibilities.
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