Which statement is true regarding the appointment of a broker by an insurance company?

Brokers operate under a different regulatory framework compared to agents when it comes to their relationship with insurance companies. Unlike agents who typically represent and have a formal relationship with a specific insurance company, brokers work on behalf of clients to find the best coverage options across various insurers. This means that brokers do not require an appointment from an insurance company to sell its products.

When an insurance company appoints an agent, it creates a legal relationship that defines the responsibilities and authority the agent has in representing the company. However, brokers act as intermediaries who provide a service to clients without being tied to a particular insurer, which is why they do not need a prior appointment to broker insurance products. They have the flexibility to negotiate and place coverage with multiple insurance companies without being formally endorsed by them.

Understanding the distinct roles and regulatory requirements of brokers compared to agents is crucial in the context of insurance operations. This difference highlights the independent nature of brokers in the marketplace.