What is the term for the person or corporation that delegates authority to an agent?

• A. Principal
• B. Agent
• C. Client
• D. Insurer

Answer: (A)

The main idea is about the principal–agent relationship. The party that gives the authority to act on its behalf is called the principal. By delegating authority, the principal sets the scope of what the agent can do, and the principal’s decisions and actions can be binding on them when the agent acts within that authority. In insurance practice, a producer (the agent) acts for the principal, which could be the insurer or the client, depending on who is delegating authority. The agent owes duties to the principal, such as loyalty and care, and the principal bears responsibility for the agent’s actions within the authorized scope. The other terms describe the performer (the agent), the customer (the client), or the insurer itself, but the term that identifies the delegator is principal.