An insurance company has established the procedures it wants followed by those who will represent the company to the buying public. Those procedures are in place to meet the legal aspects of doing business and to establish an ethical footprint in the economic world.

Underwriters are usually company employees who are educated to the philosophy of the company and are expected to hold themselves to the highest degree of integrity when determining if a contract can be drawn up between the company and someone who wants to do business with them.

The underwriter normally does not have a face-to-face encounter with a potential client. They get to see the client through forms, pictures, inspection reports, and memos provided by an agent and must make the decision to accept or reject the potential contractual relationship with a client.

In an effort to accommodate the buying public and to expedite the buying process, companies have hired agents to represent them in the field. They train the agents in company procedures, products to be sold, code of conduct expected from them, and commit them to uphold the company in a honorable manner.

With this being done, the company allows the agent to bind the insurance company to the articles of a policy. They make it very clear to the agent that he or she has no authority to bind the company to anything more or less than what is written in the contract. Usually, when an application for insurance is filled out, there is a place close to where the client and the agent sign the application which spells out the binding authority of the agent.

This binding authority is temporary and can be revoked by an underwriter finding something which would keep the company from continuing coverage.

Nothing should be more important to an agent than to honor that binding authority with utmost integrity. There is room for honest mistakes, but breaking that binding authority agreement knowingly should have zero tolerance in my estimation.