Section 1 Flashcards
Commissioner may refuse to issue any license if he finds:
- material misrepresentation or fraud in the license app
- a record of dishonesty or misappropriation of customer funds
- the applicant is incompetent or lacks moral turpitude
- a record of suspension or revocation in any other jurisdiction
- the applicant has been convicted of a felony
For the protection of the public of this state, the Commissioner may issue licenses to eligible individuals who:
- are 18 years of age or older
- are residents of this state
- passed the req exam and pay the req non-refundable fees
- have filed the proper application and submitted a fingerprint card
- shall not use the license “principally” for the purpose of selling insurance to themselves, family members or employees (controlled business)
If the license is for a corporation or partnership(agency license), the licensing application must designate
An individually licensed insurance agent.
No person should act as an
Insurance agent unless properly licensed.
An adjuster is any person who, for compensation, either adjusts, investigates or negotiates settlement of claims arising under insurance contracts
On behalf of the insurer or the insured
In order to obtain a Surplus Lines Broker license, the applicant must first
Hold a Property and Casualty Agent license
Managing General Agent (MGA):
A full time person who’s responsible for recruiting and training a local insurance sales staff for either a L&H or P&C insurer.
Non-Resident Agents: If properly licensed in their home state, and if that home state has a reciprocal agreement with Texas, the Commissioner may issue a non-resident insurance license to persons seeking to do business in Texas
Who do not have either a principal residence or place of business here.
You can only have a resident license in one state, but you could have as
Many as 49 non-resident licenses
Temporary Licenses: The Commissioner may issue a temporary resident agents license
Without examination.
All newly issued licenses will have a term of two years,
Expiring two years for the date of issue.
An individual must complete 30 hours (including 2 hours of ethics) of continuing education every two years to renew an expiring license. Persons who have continuously held an agents license for 20 years
Are exempt from continuing education requirements.
The commissioner may accept a renewal application up to 90 days late
If accompanied by a late renewal fee.
After 12 months, all applications are considered new and
Candidates must take the exam.
Reporting Change of Address, Administrative Action, or Felony Conviction: The licensee shall
notify the Commissioner in writing on a monthly basis (within 30 days)
Of any change of address, felony conviction or adverse action taken against him by any insurance regulator in Texas or any other state.
The department may, after notice and opportunity for a hearing, revoke a license if the holder has committed
a felony or misdemeanor, or has engaged in fraudulent or dishonest activity that directly relates to the duties and responsibility of the licensed occupation unless the Commissioner finds that other factors, such as the conduct and work activity of the person prior to and following the criminal activity…..
An individual whose license app has been denied or whose license has been revoked by the Commissioner
May not apply for an agent’s license before the fifth anniversary of the effective date of the denial or revocation.
Disciplinary Actions:
Refusal to Renew, Suspension or Revocation of Licenses: The Commissioner may suspend, revoke permanently or refuse to renew any license
after a hearing, if requested , for any of the following reasons: willful violation, misrepresentation , and conviction of a felony
The Commissioner shall not reissue any revoked license
for at least five years, and then only if the applicant has requalified.
Cease and Desist Orders: If the Commissioner finds that a licensee has engaged in a prohibited act, he may order
such licensee to cease and desist from such practices.
Penalties: If the Commissioner finds that any licensee has failed to perform a duty,
discharge an obligation, or has violated any insurance law, rule, regulation or order, the Commissioner may impose a maximum civil penalty up to $25,000.
Transacting Insurance: Broadly defined, generally any activity
related to the negotiation, sale or purchase of insurance comes under jurisdiction of the Texas Insurance Code.
Commissioner’s General Duties and Powers: Appointed by the Governor for two years to
enforce the Texas Insurance Code and preside over the Texas Department of Insurance.
The Commissioner has both expressed and implied powers to conduct
Audits and investigations pertaining to insurance matters to protect the public, including the power to subpoena witnesses and records.
The Commissioner shall
examine each authorized insurer not less than once every five years.
Company Regulation: To obtain a Certificate of Authority, insurers must
File for approval their rates and policy forms and post initial required legal reserves to pay future claims.
Insurers receiving Certificates of Authority are also called “authorized” or “admitted” insurers
and they must participate in the State Guranty Fund.
It is illegal for an insurer to transact business in this state without a Certificate of Authority,
except for Surplus Lines and Reinsurance companies.
Annual Financial Statements: All foreign, domestic and alien insurers
Must file annual financial statements with the Commissioner to prove they have adequate ‘legal reserves’.
Rates: Rates may not be
Too high, too low or unfairly discriminatory.
Insurer Insolvency: Upon examination (audit), if the Commissioner determines that an insurer is
Insolvent or if the continuation of its business is hazardous to the public, the Commissioner will place the insurer under the supervision of the Department of Insurance.
If placed under supervision, the insurer will have 60 days to comply with the Commissioner’s requirements. If they fail to comply, the Commissioner will immediately
take charge as conservator of the insurer and all of its property and suspend or revoke their Certificate of Authority.
Unfair Claims Settlement Practices: A person shall not commit or perform with such frequency to indicate as a general business practice any of the following:
- Failing to act promptly on claim communications
- Refusing to pay claims without conducting a reasonable investigation
- Attempting to settle on the basis of an altered application
Payment of Commissions: An insurer may only pay commissions
to licensed agents in connection with insurance transacted in Texas.
A licensee may only share commissions
received with persons also licensed as agents for the same lines of insurance.
Misrepresentation: It is unlawful for a person to knowingly make any misrepresentation in the sale of insurance, including:
- misrepresenting the terms or benefits of a policy or the dividends to be received
- making false statements about the financial condition of any insurer or the legal reserve system
Defamation: No one can make any oral or written statement that is
False or maliciously critical of the financial condition of an insurer that is calculated to injure any person engaged in the insurance business.
Unfair Discrimination: A person may not make any unfair discrimination between individuals of
The same class and equal expectation of life in the rates charged for any life insurance or annuity contract, or in the dividends or other benefits payable, or in any other terms of the policy.
No person may make any unfair discrimination in the sale of
Property and Casualty insurance in favor of a particular person, or between insureds having like risk and exposure factors in the terms of an insurance policy, or in the rate or premium changed.
It is not unfair discrimination to charge an older person more for life insurance
Than a younger person since it’s based on statistical differences.
No person may unfairly discriminate against individuals who are kind, or who have
Physical disabilities in the rates charged for or the availability of any life insurance or annuity contract.
Unfair Sex Discrimination: The availability of any insurance contract shall not be denied on the
Basis of gender or marital status.
Rebating and Illegal Inducements: No person may offer as an inducement to the
Sale any rebate of commissions or advantage in dividends not specified in the policy.
Dividends paid out of accumulated surplus
Are not considered rebates, nor is the readjustment of premiums on group insurance plans based on loss experience.
Prohibited Inducements also include the following:
- offering of employment
- giving shares of stock or securities
- any prizes or merchandise given
When new insurance is being sought, this notice must be provided at the time of
Policy delivery, at the latest. In case of renewal, the notice must be provided at least annually.
Agents must keep all files relating to fees, including written records of fee disclosures,
For a period of five years.
Fraudulent Insurance Acts: The person shall report the information in writing to the
Insurance fraud unit of the state insurance department and may also report the information to another authorized governmental agency, such as a law enforcement agency.
Fair Credit Reporting Act: Consumer reports may be furnished only for specific purposes, such as for
Insurance underwriting purposes, credit transactions, and employment.
Pre-Notification requires that the insurer notify the customer
In writing that a consumer investigative report may be ordered.
Post-Notification
Of an adverse outcome requires that the consumer be notified and provided with the name and address of the reporting agency.
The consumer has the right to obtain the substance of the report from the reporting agency and to be
Informed of anyone who received reports within the prior six months.
The insurer or agent
Is not required to show the consumer a copy of the report.
Telemarketing Sales Rule: All records related to telemarketing must be kept for a minimum period of at least
24 months from the date the record is produced.
CAN-SPAM: The act does not make spam unlawful,
it attempts to regulate it.
The Act has three provisions to which spammers must adhere:
- Unsolicited e-mails must be clearly identified as solicitation or advertisements for products and services.
- Senders must provide easily accessible, legitimate means for recipients to ‘opt out’ of receiving future messages.
- Unsolicited e-mails must contain legitimate return e-mails addresses, as well as the sender’s postal address.
Violators of the act are subject to actual damages, statutory damages or fines
Of $250 per violation, with each unlawful message to each recipient being a separate violation.
Statutory damages can go
as high as $2 million
Fraud and False Statements: persons convicted of such crimes may be fined and/or imprisoned up to 10 years, or both
and are prohibited from obtaining an agent license without prior approval of the Commissioner.
