Insurance Broker Certification Practice Exam

Which of the following is NOT a type of agent authority?

1. Implied authority

2. Shared authority

3. Apparent authority

4. Express authority

The correct answer is: Shared authority

In the realm of insurance and agency law, the types of agent authority are crucial for understanding the scope and limitations of what agents can do on behalf of their principals. The correct choice indicates that "shared authority" is not recognized as a formal type of agent authority, highlighting the importance of the other types in clarifying how agents can act. Implied authority refers to the power that an agent has that is not explicitly stated but is necessary to carry out the duties assigned. For instance, if an agent is given the authority to sell insurance policies, they may also have the implied authority to negotiate those sales. Apparent authority, on the other hand, arises when a principal's actions cause a third party to believe that the agent has authority, even if the agent does not possess that authority according to the principal's actual intentions. This form protects third parties who rely on the principal’s portrayal of the agent's authority. Express authority is explicitly granted to an agent, typically through a written or verbal agreement, specifying exactly what an agent can and cannot do. This type of authority is clearly defined and leaves little room for misunderstanding. By contrast, "shared authority" does not hold a recognized definition in agency law, which is why it is correctly identified as