Question 21

Implied authority is given by an insurer to an agent but not formally communicated.

Implied authority refers to the powers that an agent has based on their role and the actions they take, even if these powers are not explicitly stated by the insurer. This type of authority allows agents to perform tasks that are necessary for the completion of their duties.

A) Express

Express authority is explicitly granted by the insurer to the agent, typically in written form or through clear verbal communication. Since this authority is formally communicated, it does not fit the definition of authority that is given but not formally communicated.

B) Implied

Implied authority is the correct answer as it encompasses the idea that agents have certain powers that are understood as necessary for their role, despite not being directly communicated. This authority allows agents to make decisions that are customary within their scope of work without needing explicit permission for each action.

C) Written

Written authority refers to permissions and powers that are documented formally. This type of authority is clearly articulated and communicated to the agent, making it the opposite of what is being asked in the question regarding authority that is not formally communicated.

D) Apparent

Apparent authority arises when a third party perceives that an agent has authority based on the actions or representations of the insurer, even if such authority does not exist. This can mislead others into believing the agent has more power than is actually granted, but it is not the type of authority that is simply not communicated.

Conclusion

Implied authority is uniquely characterized by the absence of formal communication while still allowing agents to perform necessary functions within their role. In contrast, express and written authorities are always clearly communicated, and apparent authority is based on perceptions rather than direct permissions. Thus, implied authority is definitively the correct choice in this context.