What defines the agency relationship in insurance?

The agency relationship in insurance is fundamentally defined by the bond between an insurer and its representative agent. This relationship establishes a legal and fiduciary connection where the agent has the authority to act on behalf of the insurer in various capacities, such as selling policies, collecting premiums, and providing customer service. This bond is significant because it determines how the agent can represent the insurer, the expectations regarding conduct, and the responsibilities owed to both the insurer and the policyholders.

In this context, the other options present elements related to the insurance process but do not accurately encapsulate the defining characteristics of the agency relationship. The agreement between agents for premium collection does not illustrate the broader fiduciary relationship established with an insurer. The connection between policyholders and insurers focuses more on the policyholder's perspective rather than the agent-insurer dynamic. Lastly, the contract terms of insurance policies do not encapsulate the relationship itself but rather the agreements made between the parties involved. Therefore, it is the bond between the insurer and its representative agent that clearly defines the agency relationship in insurance.