Thelaw of agencydefines the legal relationship in which a producer has the authority to act on behalf of an insurer. Under Pennsylvania insurance regulations, the insurer is the principal, and the producer is the agent. This legal framework establishes the responsibilities, duties, and authority of both parties.

Pennsylvania-approved study guides emphasize that the law of agency governs the producer’s actions, including solicitation, application handling, premium collection, and representation of the insurer. Acts performed by the producer within the scope of authority are legally binding on the insurer.

The other options are incorrect or incomplete. A principal relationship describes the parties involved but does not define the authority itself. Producer authority is not a legal doctrine. Presumption of agency refers to an implied authority situation but does not encompass the entire legal framework. Therefore,the law of agencyis the correct and verified answer based on Pennsylvania Life, Accident, and Health Insurance licensing materials.