What does the law of agency primarily govern in insurance?

The law of agency is a legal framework that elucidates the relationship between agents and their principals, which in the case of insurance, typically involves agents acting on behalf of insurers. This body of law is crucial because it delineates the responsibilities that agents have toward both their clients (policyholders) and their insurance companies. Agents are expected to act in the best interest of their clients while also adhering to the policies and regulations set forth by the insurer. This includes duties such as providing accurate information about policy terms, ensuring proper communication with clients, and adhering to ethical standards in promoting insurance products.

Through this framework, the law of agency ensures that there is clarity regarding the expectations and obligations of agents in their professional conduct. It helps maintain trust and accountability in the insurance industry by defining how agents should represent their insurers and manage their relationship with the policyholders. Consequently, this understanding is essential for anyone involved in insurance transactions, as it underscores the legal duties agents have in their role within the industry.