Final answer:
An insurer's agent has authority to sell insurance policies and negotiate lower rates. State regulations on low premiums can force insurers to withdraw from markets if they face losses due to high-risk clients, as seen in New Jersey and Florida.
Step-by-step explanation:
The authority an insurer gives to an agent through the agent's contract primarily allows the agent to sell insurance policies on behalf of the insurer. This includes negotiating lower rates with service providers due to the large number of clients insurers typically have, something individuals can't do on their own.
However, state insurance regulators trying to set low premiums can lead to insurers exiting markets if they cannot sustainably cover high-risk or medium-risk parties. This was evident when more than 20 insurance companies withdrew from New Jersey and when State Farm stopped selling property insurance in Florida.