Under the Law of Agency, who is considered the principal?

In the context of the Law of Agency, the principal is typically the party that grants authority to an agent to act on their behalf. In insurance, the insurer is considered the principal because they empower agents, such as producers, to sell their insurance products and represent their interests in the marketplace. This relationship establishes a binding connection, whereby the actions of the agent can create obligations for the insurer.

The producer, or agent, operates on behalf of the principal (the insurer) and facilitates transactions between the insurer and the insured. The plan administrator usually manages a health benefit plan but does not hold the same authoritative role as the insurer in this context. The insured, the individual or entity receiving the insurance coverage, is not part of the agency relationship that defines the principal-agent dynamic within the insurance framework. Therefore, identifying the insurer as the principal is accurate within the scope of agency law in insurance.