Chapter 1

Question 1

Who is an agent? (6)

Answer 1

Solicits Insurance
Takes or transmits an application for insurance
Receives or delivers a policy
Examines or inspects a risk
Collects or transmits any premium for insurance
Adjust a claim on behalf of an insurance company

Question 2

Agent

Answer 2

A representative of an insurance company

Question 3

Broker

Answer 3

Represents the policyholder

Question 4

Types of Licenses (10)

Answer 4

Property Casualty Agent (PCA)
Insurance Service Representatvie (ISR)
Survivors: Temporary License
Emergency PCA license
Non-Resident Agent
Managing General Agent (MGA)
Surplus Lines
Risk Manager
Limited Lines License
Adjusters

Question 5

Property Casualty Agent (PCA)

Answer 5

Agent authorized to write, sign, execute, and deliver policies. PCA must have an APPOINTMENT by an Insurance company.

Question 6

Types of Property Casualty Agents (3)

Answer 6

Individual: Solicits directly from the public and must be sponsored by an insurance company.

Partnership: Responsible for the Agency, but needed to borrow money

Corporation: Using Bank Loans and issued to a company and located in TX

Question 7

Insurance Service Representative (ISR)

Answer 7

Representative of one PCA at a time. Only preforms duties within the office of a PCA. No outside solicitating is permitted (Cold calls). Paid salary with an option for commission. May bind coverages with PCA’s approval.

Question 8

Survivors: Temporary License

Answer 8

Upon death of a PCA, the surviving spouse and children may continue to share in the profits of the agency without obtaining a license. They cannot write new business. Planning to sale.

Question 9

Emergency PCA license

Answer 9

In the death or disability of a PCA, the TDI may issue an emergency PCA for a 90 day period to an individual who will conduct the business of the agency. They may get an additional 90 days upon request.

Question 10

Non-Resident Agent

Answer 10

Needs a counter-signed by a resident PCA. They may share commission. They may not solicit business in Texas. They must be license in their home state in order to receive a non-resident license for Texas

Question 11

Managing General Agent

Answer 11

Supervisory responsibility for an agency. They do not deal with the insuring public and may not sign or execute policies.

They perform the following acts:
Receive and pass on daily reports.
Receive and be responsible for agency balances
Appoint PCA’s

Question 12

Surplus Lines

Answer 12

High risk insurance. To apply for a surplus license they must have a PCA or MGA or both.

Question 13

Risk Manager

Answer 13

Evaluates risks for another person or company. They are not agent and cannot collect commission.

Question 14

Limited Lines License

Answer 14

Banks and Rental car agencies.

Question 15

Adjusters

Answer 15

Initially issued a temporary license good for 1 year. Adjuster must complete 40 hour licensing preparation course and pass the state exam.

Question 16

Controlled Business Law

Answer 16

25% of business must come from the general public

Question 17

Continuing Education (CE)

Answer 17

Agents must be responsible for maintaining 4 years worth of CE records. All agents are required 24 hours of CE every 2 years.

Question 18

Reporting Change of Address

Answer 18

Any changes (name or address) must be reported IMMEDIATELY to the TDI

Question 19

Fair Credit Reporting Act (FCRA)

Answer 19

Consumer’s right to privacy. If the consumer is denied credit, insurance, or employment because of poor credit, the consumer must be informed. The consumer must be given the name and address of the reporting agency.

Question 20

Surrender of License

Answer 20

If an agent surrenders their License, they are still responsible for any offenses prior to the effective date of the license surrender.

Question 21

Suspension/Revocation (9)

Answer 21

Willful violation: Knowingly breaking the law

Misrepresentation: Lying

Conversion of money: Stealing money (embezzlement)

Found guilty of fraudulent or dishonest acts.

Misrepresentation of the terms and conditions of any insurance policy or contract

Twisting: Misleading comparison of policies to induce the insured to change policies.

Conviction of a felony

Rebating: Promising an insured something of value if the policy is purchased.

Writing fire insurance in excess of property value.

If the agent is found guilty and their license is suspended, an applicant may not reapply for 1 year.

Question 22

Penalties

Answer 22

Cease and desist order can be issued. If they violate the cease and desist they fined up to $1,000 per violations for a max of $5,000.

Companies operating without a license can be fined up to $10,000 per violation per day.

Question 23

State Regulations

Answer 23

Governor appoints the state commissioner of insurance. He administers, enforces, and carries out the insurance code. He also determines TDI policy, adopts rules and hears appeals. Anyone can appeal within 30 days.

Question 24

Duties of a Commissioner (13)

Answer 24

Execute insurance laws

File and hold articles of incorporation of insurance companies

Calculate reinsurance reserves of insurance companies

Cancel or revoke any license or certificate of authority.

Publish results of company examinations

Report violations of law to the Attorney General

Send a copy of TDI’s annual report to other states

Hold deposits for foreign or alien insurers

Maintain a complaint file for 3 years

Appoint deputies as necessary

Examine an agent’s books or records at any time for any reason.

Examines financial conditions of every insurance company authorized to do business in Texas every 5 years. New companies are examined every year for the first 3 years.

Forms a fraud department to investigate and evaluate suspicious insurance activities

Question 25

Company Regulations

Answer 25

If companies meet the requirements for Texas Laws they are granted a CERTIFICATE OF AUTHORITY. If a company does not meet the requirement they are called NON-ADMITTED or NON-AUTHORIZED companies.

Question 26

Texas Surplus Lines Stamping Office

Answer 26

Maintains a list of non-authorized insurers available to the public.

Question 27

Unfair Claims Settlement

Answer 27

Knowingly misrepresenting policy provisions

Failing to promptly acknowledge claims and related communications

Failing to adopt standards for prompt investigation of claims

Not attempting in good faith to make a prompt, fair and equitable settlements where liability is reasonable clear.

Failing to maintain a record of all complaints involving claims

Failing to assure that agents make cancellation refunds to policyholders

Deductible recovery

Question 28

Unfair Trade Practices and Deceptive Trade Practices Act

Answer 28

Action must be brought within 2 years from the date of discovery

Misrepresentation: Lying

False Advertising: Misleading statements in writing, radio, TV, or any public manner of advertisement.

Defamation: Statement or literature that is false or malicious to damage another insurer

Unfair Discrimination: Discrimination between individuals of the same class

Boycotts, Coercion and Intimidation: Restraint of trade or a monopoly in the insurance business.

Rebating: Offering anything of value not specified in the insurance contract to encourage customer to purchase insurance.

Unfair Competition: Using a name deceptively similar to another insurance company. (Guyco)

Testimonials: Must be genuine. They must disclose whether the person making the testimonial has a financial interest or it is a paid endorsement.

False use of statistics: Statistical information shall not use irrelevant facts and must accurately reflect all relevant facts.

Unlawful inducement: Advertisement must no imply or guarantee a contractual right of monetary value outside the contractual terms.

Disparaging: False or misleading representation of goods or services provided by others.

Question 29

Referral Business

Answer 29

Broker. PCA can refer business to another PCA and share commission. The referring agent does not have an appointment from the company writing the insurance and must inform the customer in writing that they do not represent the insurance company.

Question 30

Joint Advertising

Answer 30

Two or more PCA’s can advertise on the same publication as long as it is clear which agent represents a particular agency.

Question 31

Texas Certified Self-Insurer Guaranty Association

Answer 31

Every self-insurer must be a member of the Texas Certified Self-Insurer Guaranty Association. A fund established to pay benefits to injured workers of impaired self-insurers.

Question 32

Texas Property & Casualty Guaranty Association

Answer 32

Protects policyholders of impaired or insolvent insurers.

Up to $25,000 of unearned premium

Up to $300,000 of any claim other than workers compensation, or the limits of the pervious policy, which every is less.

Full amount of worker compensation claims.

The claim must occur within 30 days of insolvency or the expiration date of the policy.

State divides the losses among the companies of the same type.

Some companies not included are surplus lines, county mutuals, and flood.

Question 33

Fee Disclosure and Sales Tax Implications

Answer 33

Procedure:

Customer approval

Disclosure of service fees

Reimbursement from customers from MVR’s and photographs

Sales Tax is included in fees

Record must be kept for 5 years