Chapter 1 Flashcards
What is a broker?
Brokers represent the policyholder in any dispute.
What is an agent?
Agents are presumed to be a representative of an insurance company.
An agent may perform any of the following tasks:
Solicit insurance
Take or transmit an application for insurance
Receive or deliver a policy (issue)
Examine or inspect a risk
Collect or transmit any premium for insurance
Adjust a claim on behalf of an insurance company.
What are the 6 primary types of licenses offered by the state?
Property & Casualty Agent (PCA) Insurance Service Representative (ISA) Managing General Agent (MGA) Risk Manager Adjuster Surplus Lines
Property Casualty Agent (PCA)
Is authorized to write, sign, execute and deliver policies.
Only a PCA can bind a company on a risk or sign a policy.
All policies must be signed by a resident PCA.
PCA must be appointed by an insurance company.
PCA’s can appoint other licensed individuals (ISRs) to bind polices for them.
What are the 3 types of PCAs?
Individual - solicits business directly from the public and must be sponsored by an insurance company.
Partnership - must license the company and 1 partner. All employees actively selling insurance must be licensed.
Corporation - organized under Texas law and located in Texas. Only one officer or director must be licensed as a PCA. Must also demonstrate financial responsibility by holding an Errors & Omissions policy of $250,000 or a bond of $25,000.
What are the 2 situations that one may take actions requiring a PCA license without actually having one?
Survivors: Temporary license
Emergency PCA licensed
What is a survivors temporary license?
Upon death of a PCA, the surviving spouse or children may continue to receive commissions but cannot write new business.
What is an emergency PCA?
In the event of a death or disability of a PCA, allows an individual to conduct business of the agency. Is limited to 90 days. (may be renewed for 1 additional 90 day period)
What is an ISR?
An ISR is a licensed representative of a PCA who only performs assigned duties within the office of a PCA.
Is not allowed to solicit outside, no cold calling.
May only represent one PCA at a time.
May bind coverage with PCA’s expressed prior approval.
Is paid a salary with ability to earn commissions and bonus.
What is a Non-Resident Agent?
Can write business in Texas if it is counter-signed by a resident PCA.
May not solicit business in Texas or act as a PCA.
Must be licensed in home state.
Managing General Agent
A MGA is a person or corporation with supervisory responsibility for an agency.
May receive and pass on daily reports, receive and be responsible for agency balances and appoint PCA’s.
May not deal with insuring public and may not sign or execute policies.
Must have an Errors & Omissions Policy of $250,000 or bond if $25,000.
Surplus Lines Agent
Must be appointed by a surplus company and hold a surplus license.
To apply for a surplus license you must have either a PCA, MGA or both.
Is considered non-admitted.
What is a Risk Manager?
Consultants
Evaluates risks for another person or company and advises on how to reduce their loses and exposure to risk.
Can collect a fee for services as long as fee disclosed prior to services.
Is not an agent.
Limited Lines License
Banks and rental car companies must be licensed to sell insurance products that they sale.
What are adjusters?
Is initially licensed for 1 year.
Must compete a 40 hour preparation course and pass state exam.
Controlled Business Law
A PCA must generate at least 25% of their business from the general public (random).
75% can be from their own selection.
Continuing Education Requirments
30 hours every 2 years
Minimum 15 per year
Must maintain CE records for 4 years
Reporting Address Change
Address changes must be reported immediately.
Fair Credit Reporting Act
If a consumer is denied credit, insurance or employment as result of information in a credit report, the consumer must be informed and given name of reporting agency used.
Consumers may refute any information they feel is incorrect.
Surrender of License
The surrendering of a license will NOT negate any offense prior to the effective date of the license surrender.
What are reasons why a license can be suspended or revoked?
Willful violation - knowingly breaking insurance law
Misrepresentation (lying) or fraud in obtaining license
Conversion of money (embezzlement)
Found guilty of fraudulent or dishonest acts
Misrepresentation of the terms and conditions of any insurance policy or contract
Twisting - Making a misleading comparison of policies to induce an insured to change policies (incomplete comparison)
Conviction of a felony
Rebating - promising an insured something of value if policy is purchased
Writing fire insurance in excess of property value
Any agent must report unauthorized activities
What is misrepresentation?
Lying
What is twisting?
Incomplete comparison
Making a misleading comparison of policies to induce an insured to change policies
What is rebating?
Promising an insured something of value if the policy is purchased.
Penalties
A cease and desist order can be issued.
If a person violates the cease and desist order, they can be fined up to $1,000 per day up to $5,000 for all violations.
Companies can be fined up to $10,000 per violation per day.
Who appoints the commissioner of insurance?
The governor.
What does a commissioner of insurance do?
Administers, enforced, and carries out the insurance code.
Also determines TDI policy, adopts rules and hears appeals.
Executes insurance laws
File and hold articles of incorporation of insurance companies
Calculates reinsurance reserves at end of each calendar year
Cancel or revoke any license and it certificate of authority
Publish results of company examinations when deemed in public’s interest
Report violations of law to Attorney General
Send copy of TDI’s annual report to other states
Hold deposits for foreign or alien insurers
Maintain a complaint file
Appoint deputies
Examine agents books or records at any time for any reason
Admitted vs Non-admitted
Admitted Also know as authorized Meets requirements of Texas law Are granted a certificate of authority Requires minimum reserve
Non-admitted Also known as non-authorized Does not have certificate of authority Surplus lines Large or unusual risks
Texas Surplus Lines Stamping Office
Maintains a list of unauthorized insurers
How often is an insurance company examined?
New
Once a year for 3 years then every 5 years
Established
Every 5 years
Can be examined at any time for any reason
Unfair Claims Settlement
Protects the rights of claimants in Texas
Protects against:
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 prompt, fair and equitable settlements where liability is reasonably clear
Failing to maintain a record of all complaints involving claims
Failing to assure that agents make cancellation refunds to policyholders
Deductible recovery
Notice of claim
91 days
Consent to settle loss
We do NOT need insured permission to settle a claim
Loss Settlement Provisions
We may repair, replace or restore to previous condition using cheapest way
Right of Salvage
Insurance company has right to salvage
Unfair Trade Practices and Deceptive Trade Practices Act
If an agent knowingly violates three laws the consumer can be rewarded triple damages.
Action must be brought within 2 years from date of discovery.
Once charges filed, they cannot be dropped unless the consumer has $5 million or more in assists (equal bargaining power)
What acts are illegal under UTP and DTPA?
Misrepresentation - untrue statements False Advertising Defamation - any statement or literature that is false, malicious or derogatory used to damage another insurer Boycotts, Coercion and Intimidation Unfair Discrimination Rebating and Unlawful Inducements Unfair Competition - using a similar name Testimonials must be true and accurate False use of statistics Unlawful inducement Disparaging
Referral Business
A PCA can refer business to another PCA and share commissions.
The referring agent can collect premiums and deliver policy but is considered a representative of the insured.
Texas Certified Self-Insurer Guaranty Association
Every self-insurer must be a member of the Texas Certified Self-Insurer Guaranty Association.
Common with workers compensation
Texas Property & Casualty Guaranty Association
Protects policyholders of impaired on insolvent insurers.
Up to $25,000 of unearned premiums
Up to $300,000 of any claim other than workers compensation, or the limits of their previous policy, whichever is less.
Full amount for workers compensation.
Claim must occur within 30 days of insolvency or the expiration of policy, whichever is less.
In order to cover the funds paid on claims, the state divides the losses among the companies of similar type.
Surplus lines, county mutual and flood is not in the association.
Certificate of Authority
Indicates that an insurer is authorized to transact insurance in Texas as an admitted carrier
Defamation
Publishing false or critical information about another insurance company with the intent to damage that company
How much does the Texas Property & Casualty Association in Texas cover individual claims against an insolvent insurer, other than workers compensation?
$300,000
To what percent does the Property Casualty Guaranty Association in Texas cover workers compensation?
100%
To what extent will the Property Casualty Guaranty Association in Texas cover claims for unearned premiums?
$25,000
The decision making power of the TDI rests with
The commissioner of insurance
A suit appealing a decision of the commissioner must be brought
In Travis county district court
Once a license is revoked, the insurer may not receive another license for:
1 year
Who can deal directly with non-admitted, surplus lines companies?
Surplus lines agent
The Texas Property and Casualty Insurance Guaranty act does not apply to
Non-admitted insurance companies, Federal flood insurance, County Mutual Compaies
The Property Casualty Insurance Guaranty Fund is funded by
Assessments against all Licensed companies
