chapter 5 Flashcards
how are insurance companies classified, and what does it need before transacting insurance within the state?
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describe the difference between a foreign and alien insurer.
They are classified according to their location of incorporation (domicile) and they need a Certificate of Authority before transacting insurance in any state.
a foreign insurer is an insurer incorporated outside your state, in DC, or in one of the US territories. An alien insurer is incorporated outside the US.
define the following :
- stock companies
- nonparticipating policies (how policyowners and stock holders are involved)
- mutual companies
- participating policies (how policyowners and stock holders are involved)
- fraternal benefit society
stock company = owned by stockholders who provide capital to establish/operate insurance company; owners share in company profits and losses (get paid taxable dividends)
nonparticipating policies = policyowners don’t receive dividends, taxable dividends are paid to stockholders
mutual company = owned by policyholders, policyholders can receive already-taxed dividends
participating policies = policyowners receive unguaranteed dividends that are the result of excess premium payments (non taxable) —- Dividends are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus
fraternal benefit society = charitable institutions (not insurers) that provide insurance benefits to members like religious orgs and fraternal orgs. They offer life / health insurance and annuities, and they don’t have the same insurance regulations.
what is an authorized / admitted and unauthorized / nonadmitted insurer? describe any necessary tools to transact insurance, who grants them, and requirements to maintain them.
Insurers who meet a state’s financial obligations AND has a Certificate of Authority are considered authorized/admitted into the state as a legal insurer.
Those insurers who have not been approved to do business in the state are considered unauthorized or nonadmitted.
An insurance company must hold a certificate of authority issued by the Commissioner in order to transact insurance business in Texas.
If an insurer fails to file an annual statement required by law, the insurer’s certificate of authority may be suspended or revoked by the Department. The Commissioner must provide a 10-day notice of suspension or revocation to the insurer.
describe the following :
- who regulates insurers & other companies that deal with insurance in Texas?
- who is the Commissioner, who appoints them and for how long, and what are the requirements of a person in that role?
- how often does the Commissioner examine authorized insurers in the state, what period of time is examined, and which insurers gets examined?
- The Texas Department of Insurance regulates insurers and other companies that conduct, solicit, and/or sell insurance in this state.
- the Commissioner is the chief executive / administrative officer over the department of insurance. They must have been a CPA / attorney / administered business or government for at least 5 years . The governor appoints the commissioner and they are in the role for 2 years (every Feb 1 of odd numbered years, it changes)
- The Commissioner must examine all authorized insurers at least once every 5 years. This examination requirement applies to all domestic insurers (organized under Texas laws), as well as admitted foreign and alien insurers.
- During an examination, the Commissioner reviews all business records occurring between the last day of the previous examination and December 31 of the year preceding the current examination year.
- The cost of examinations is the responsibility of the insurance company being examined.
List the following :
- length of commissioners term in office?
- frequency with which a commissioner examines authorized insurers?
- if an agent is served with an emergency C&D, how long do they have to request a hearing before it is final?
- how long does an agent have to request a hearing after receiving a cease and desist order?
- after receiving a request for a hearing in connection to C&D, how long does the Commissioner have to hold the hearing?
- what are the administrative penalties for a person who violates a C&D?
- what are the civil penalties for a person who violates a C&D?
- length of commissioners term in office? —– 2 YEARS
- frequency with which a commissioner examines authorized insurers? —– 5 YEARS
- if an agent is served with an emergency C&D, how long do they have to request a hearing before it is final? —- 61 DAYS
- how long does an agent have to request a hearing after receiving a cease and desist order? —– 60 DAYS
- after receiving a request for a hearing in connection to C&D, how long does the Commissioner have to hold the hearing? —– 30 DAYS
- what are the administrative penalties for a person who violates a C&D? —- $1000 FOR EACH PENALTY, $5000 FOR ALL PENALTIES, $25000 MAX
- what are the civil penalties for a person who violates a C&D? —- $50 (OR $500 IF WILLFUL VIOLATION)
List the following :
- minimum age required for licensing?
- max cost of insurance licensing fee?
- how long are the results of the licensing exam valid?
- what is the max duration of temporary licenses?
- how often must an agent’s license be renewed (reporting period)?
- how much notice must the department give for expiration of their license?
- explain the reinstatement rules and time frames for an expired license.
- minimum age required for licensing? — 18 YEARS
- max cost of insurance licensing fee? — $50
- how long are the results of the licensing exam valid? — 12 MONTHS
- what is the max duration of temporary licenses? —- 6 MONTHS / 180 DAYS
- how often must an agent’s license be renewed? — EVERY 2 YEARS ON BIRTHDAY
- how much notice must the department give for expiration of their license? —- 30 DAYS
- explain the reinstatement rules and time frames for an expired license.
- EXPIRED FOR <90 DAYS : RENEWAL APPLICATION & FEE PLUS AN ADDITIONAL 50% OF RENEWAL FEE
- EXPIRED BETWEEN 90 DAYS AND 1 YEAR : NO EXAM, NEW APPLICATION FEE PLUS AN ADDITIONAL 50% OF APPLICATION FEE
- EXPIRED >1 YEAR : NO RENEWAL, GO THROUGH COMPLETE PROCESS LIKE THEY’RE NEW
List the following :
- how many CE hours every renewal (reporting) period , and how many hours must cover ethics?
- how long does a licensee have to complete deficient hours before expiration date, and how much is the fine? what happens if they don’t do it?
- how much of CE hours must be completed in a classroom / classroom equivalent?
- producers who sell annuities or who transact Medicare must complete how many hours of related CE?
- how long do you have to wait in Texas before another license application can be filed after license revocation or denial?
- how long after felony conviction or breach of fiduciary duty can another license application be filed?
- how much of a licensee’s total volume of business (premium commissions) must be from business other than controlled business (immediate family or close associates)?
- how many CE hours every renewal (reporting) period , and how many hours must cover ethics? —- 24 HOURS, 3 COVERING ETHICS
- how long does a licensee have to complete deficient hours before expiration date, and how much is the fine? what happens if they don’t do it? —- 90 DAYS, $50 PER DEFICIENT HOUR
- how much of CE hours must be completed in a classroom / classroom equivalent? — 50%
- producers who sell annuities must complete how many hours of annuities-related CE? — 8 HOURS
- how long do you have to wait in Texas before another license application can be filed after license revocation or denial? —- 5 YEARS
- how long after felony conviction or breach of fiduciary duty can another license application be filed? — 5 YEARS
- how much of a licensee’s total volume of business (premium commissions) must be from business other than controlled business (immediate family or close associates)? – 25%
List the following :
- max fine for violating Insurance code?
- fine for willful violation of Fair Credit Reporting Act?
- what is rebating (give a few examples)
- how long does a person have to report information about fraud?
- how many days after receiving a claim must an insurer acknowledge receipt and begin investigation? how long does the insurer have to notify claimant of claim acceptance or rejection?
- how long does an insurer have to pay claim after approval?
- max fine for violating Insurance code? —— $25000
- fine for willful violation of Fair Credit Reporting Act? — $2500
- rebating is inducement offered to insured in the sale of insurance products that isn’t specified in the policy — can include rebates on premiums, special favors, advantages in dividends, stocks, bonds, securities, profits.
- how long does a person have to report information about fraud? — 30 DAYS
- how many days after receiving a claim must an insurer acknowledge receipt and begin investigation? — 15 DAYS
- how long does the insurer have to notify claimant of claim acceptance or rejection? —- 30 DAYS
- how long does an insurer have to pay claim after approval? – 5 DAYS
What is the Texas Life and Health Insurance Guaranty Association?
Nonprofit legal entity that protects policyowners, insured, beneficiaries, and anyone entitled to payment under an insurance policy from the incompetence and insolvency of insurers. all authorized insurers must be members of the Association
