What is meant by binding authority in insurance?

Binding authority in insurance refers to the power of an agent or broker to commit an insurer to provide coverage on a policy without first obtaining the insurer's approval. This means that when an agent has binding authority, they can effectively finalize the insurance contract and make it legally binding for both the insured and the insurer at the moment they agree to the terms.

This authority allows agents to quickly respond to clients' needs and market demands, facilitating smoother transactions and enhancing customer satisfaction. It is particularly valuable in situations that require immediate coverage, such as when a business needs insurance to commence operations or when a property is about to be purchased.

Understanding binding authority is crucial for those working in the surplus lines market, as it often deals with unique risks and varies significantly based on the type of coverage and the insurer's policies.