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An agency contract is essential in defining the professional relationship between the insurance company and the agent. The key focus of this contract is to outline the specific authority granted to the agent within the company. This includes the scope of activities the agent is allowed to perform, such as binding coverage, issuing policies, or negotiating claims. By laying out these authorities, the contract ensures that both parties understand their roles and responsibilities, which helps to prevent misunderstandings and potential legal issues.

While the contract may also touch on other elements, like commission rates or the types of policies the agency can sell, the primary purpose is to clarify the extent of the agent's authority and the terms under which they operate on behalf of the insurer. This focus ensures that the agent acts within the framework established by the insurance company, maintaining compliance and risk management practices vital for the integrity of the insurance services provided.