What term best describes a situation where the agent can act on behalf of an insurer based on established authority?

The term that best describes a situation where the agent can act on behalf of an insurer based on established authority is express authority. This type of authority is explicitly granted by the insurer to the agent through a written or verbal agreement. It clearly outlines what actions the agent is allowed to take, such as binding coverage, negotiating policy terms, or handling claims, based on the specific terms described by the insurer.

Express authority is critical in establishing the clear parameters of the agent's role, providing confidence to both the insurer and clients that the agent has the legitimate power to represent the insurer's interests within those parameters. It ensures that transactions and decisions made by the agent align with the insurer’s intent and policies, thereby facilitating smooth business operations.

In contrast, implied authority refers to the authority that is not explicitly stated but is necessary for the agent to perform their duties effectively. An agency agreement is a broader term that describes the relationship between the insurer and the agent but does not specifically define the nature of the authority. Principal authority is not a standard term used in the context of agency relationships in insurance, making it less applicable.