Chapter 14 - TX Laws

The department may not hold the hearing before the

6th day after the date the notice is served.

If not renewed

an insurance license will expire on the second anniversary of the date it was issued.

insurer's performance compared to

minimum standard of performance

Agents may not renew licenses that have been

suspended or revoked

An individual who was denied a license must wait to reapply for a license a minimum of: A 90 days B 6 months C 5 years D 2 years

C

Temporary Agent

may be issued by the Department under certain circumstances; it will be valid for 90 days, and in no case, may be issued or renewed to the same applicant more than once in any consecutive six-month period

The following acts that involve transacting insurance include:

Issuing or proposing to issue, as an insurer, an insurance contract Taking or receiving of an insurance application Receiving or collecting any consideration for insurance, including a premium, commission, membership fee, or assessment Issuing or delivering an insurance contract Directly or indirectly acting as an insurance producer or otherwise representing an insurer

Annuity Suitability Agent Training Requirements

An agent may not solicit the sale of annuity products without adequate knowledge of the product to make recommendations. Any agent engaging in the sale of annuity products must complete a one-time training course approved by the Texas Department of Insurance as provided by an approved continuing education provider. This training must qualify for at least 4 continuing education credits, but may be longer.

mutual insurer

An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them. directors declare issuance of dividends, which are a non-taxable return of profit, they are paid to the policyholders.

stock insurer

An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.

The Department will issue an agent license if the applicant:

Is at least 18 years of age Has not committed an act for which a license may be denied Submitted the application, appropriate fees, and any other required information Passed a licensing exam within the past 12 months

Licensees who act as an agent with respect to certain products must complete certification courses and continuing education that relate specifically to the following products:

LTC Partnership and Medicare-related Products An 8-hour certification course is required before acting as an agent with regard to any of these products 4 hours of certified continuing education, per licensing period, is required if a licensee acts as an agent, or intends to act as an agent, with regard to these products Small Employer Health Benefit Plans An 8-hour certification course is required before a licensee may advertise that he/she is specially trained to serve small employers in the health benefit plan market 5 hours of certified continuing education, per licensing period, is required for a licensee to renew a small employer health benefit plan specialty certification

If any person discovers or reasonably suspects that a fraudulent insurance act has been committed, or will be committed, the person:

Must file a written report with the Department's insurance fraud unit or the National Association of Insurance Commissioners (NAIC) May also file a report to any authorized government agency

bc dividends are never guaranteed,

No insurance company advertising may use the word dividends, or similar words, to imply that future dividends will be paid or are guaranteed

a fiduciary

Owes his loyalty to his principal Cannot put his or anyone else's personal interests before those of the principal Cannot profit from the relationship unless the principal permits it

he following acts are prohibited inducements to offer or purchase insurance:

Pay, give, or allow (or offer to pay, give, or allow) a: Rebate of policy premiums Special favor or advantage concerning policy dividends or benefits Valuable consideration not stated in the policy Give, sell, or purchase (or offer to give, sell, or purchase): Stocks, bonds, or securities of an insurer Dividends or profits from the stocks, bonds, or securities of an insurer Anything of value not stated in the policy

To be eligible for a temporary license, an individual must submit an application accompanied by:

The appropriate nonrefundable fee A certificate signed by an agent, insurer, or HMO stating that: The applicant is being considered for appointment by the agent, insurer, or HMO The agent, insurer, or HMO wants a temporary license to be issued to the applicant The applicant will complete at least 40 hours of supervised training, with at least 10 of those hours completed in a classroom setting, within 14 days from the application date

A misrepresentation is an untrue or misleading statement, the omission of a pertinent disclosure or a material fact, or a material misstatement of law, whether the misstatement is made verbally or in writing, if it concerns:

The terms of a policy The benefits or advantages promised by a policy The dividends, or share of surplus, to be received from a policy The financial condition of an insurer The legal reserve system used by a life insurer The use of a policy type or class that misrepresents the true nature of the policy The use of a misrepresentation to a policyholder to induce the policyholder to lapse, cancel, or surrender an existing policy

hearing

10 days after commissioner receives request

Which type of insurance company is owned by its policyholders? A Mutual insurer B Admitted insurer C Stock insurer D Non-admitted insurer

A

An insurance agent does NOT owe a fiduciary duty to: A Insurance counselors B Insureds C Insurers D Insurance applicants

A; An agent owes a fiduciary responsibility to its insurer, insurance applicants, insureds, but not insurance counselors or other agents

what crimes disqualify persons from licensure due to their serious nature?

Any offense for which fraud, dishonesty, or deceit is an essential element Any criminal violation of Texas insurance code, state or federal insurance law, or state or federal securities law that pertains to the business of insurance Any felony that involves moral turpitude (an act that violates accepted moral standards) or a breach of fiduciary duty Any offense with the essential elements of criminal homicide, felony assault, arson, robbery, burglary, or theft Kidnapping, public lewdness, indecent exposure, indecency with a child under age 17, prohibited sexual conduct, certain domestic violence crimes in violation of a court order, stalking, and child pornography Commission of a misdemeanor or felony, or engaging in fraudulent or dishonesty activity, relating to the duties associated with the license

An agent's appointment: A Must be renewed before the license expires B Can only be canceled if the agent fails to write new business C Is valid for a maximum of 2 years D Remains in force until terminated or withdrawn

D

A corporation or partnership licensed as an agent must file under oath, on a form developed by the department, biographical information for:

Each executive officer, director, or unlicensed partner who administers the entity's operations in this state Each shareholder who is in control of the corporation or partner who has the right or ability to control the partnership If the corporation or partnership is owned, in whole or in part, by another entity, each individual who is in control of the parent entity

agent

a person authorized and licensed to transact insurance on behalf of an insurer, and includes a subagent and any other person who performs the acts of an agent, including selling, soliciting, and negotiating insurance or annuity contracts and collecting such premiums.

the Department requires licensees to be

honest, trustworthy, and reliable.

Insurance Fraud Unit

may receive, review, and investigate anti-fraud reports and must provide written annual reports to the Commissioner that contain the number of completed cases and its recommendations for response to those cases. An insurer is not required to complete a fraud investigation before requesting that the Commissioner conduct an investigation.

A request to contest an order must:

Be in writing Be directed to the commissioner State the grounds for the request to set aside or modify the order 30 days

records of complaints

the records must indicate the total number of complaints, classification by line of insurance, nature of each complaint, disposition, and time spent processing each complaint.

Which of the following is not a prohibited claims settlement practice? A Requiring a claimant's income tax return while investigating a fire B Misrepresenting a material fact to a claimant C Refusing to pay a claim without reasonably investigating it D Denying a claim without providing the basis for the denial

A; Requiring a claimant's federal income tax return to settle the claim is permitted under a court order or if the claim involves a fire, lost profits, or lost income.

Which of the following is not a duty of the Commissioner? A Make state insurance laws B Handle insurance-related consumer complaints C Enforce state insurance laws D Issue an insurance license for a producer

A; The Commissioner must enforce state insurance laws, not establish them.

Commission Sharing

An insurer or agent may not pay to another person, or accept from another person, a commission or other valuable consideration unless such person holds a license to act as an agent in the same line of insurance in this state

The Texas Department of Insurance requires all licensees to: A Engage in the business of insurance for the sole purpose of transacting insurance with family members B Be honest, trustworthy, and reliable C Complete 40 hours of prelicensing education D Obtain a Certificate of Authority

B

Certificate Authority

an organization that issues public and private keys and records the public key in a digital certificate

an agent may not pay, permit, give—or offer to pay, permit, or give—any of the following to a person, including an insured purchasing insurance, who does not hold an agent license:

A commission, a rebate of premium, a contract for service, or any other valuable consideration or inducement not contained in the insurance policy A fee or other valuable consideration for referring a customer who seeks to purchase insurance or insurance advice if it is based on the customer's purchase of insurance.

An individual licensed as an agent must notify the department on a monthly basis of:

A change of the license holder's mailing address A felony conviction of the license holder An administrative action taken against the license holder by a financial or insurance regulator of this state, another state, or the United States

A corporation or partnership must notify the department no later than 30 days after the date of:

A felony conviction of a licensed agent of the entity or an individual associated with the entity who is required to file biographical information with the department The addition/removal of an officer, director, partner, member, or manager

Guaranty Association

A state association that takes control of an insolvent insurance company and provides the funds to pay for claims that the company is unable to pay.

A license may be suspended or revoked for which of the following? A An agent is actively engaged in soliciting insurance only to family members B A licensee completed 24 continuing education hours, including 2 hours of ethics before the expiration date C An agent obtains a nonresident license in another state D A licensed insurance counselor charges a fee to review a policy and provide advice

A; An agent will have a license suspended or revoked if only soliciting or writing insurance on family members.

The Commissioner is authorized to perform all of the following duties, except: A Suspend insurance licenses for up to 5 years B Adopt reasonable rules and regulations to enforce insurance laws C Issue cease and desist orders D Conduct investigations

A; up to 1 year - not 5

Fraud

An act that violates a penal law and is committed while engaging in the insurance business, as part of an insurance transaction, or as a part of an attempt to defraud an insurer.

Boycott, coercion, and intimidation

It is illegal to commit an act of boycott, coercion, or intimidation that results in unreasonable restraint of, or monopoly in, the insurance business.

Fiduciary Responsibility

Keep premium funds in a trust account separate from other funds Forward premiums to insurer on a timely basis Report any material facts that may affect underwriting Solicit, negotiate, sell, and cancel insurance policies as required by the insurer Only recommend the purchase of policies that are suitable for the applicant Seek and gain knowledge of an applicant's insurance needs Review and evaluate an applicant's current insurance exposures, risks, coverage, and limits While acting in a fiduciary capacity on behalf of the insurer, also serve the best interests of the applicant or insured Recommend coverage that best protects the interests of the applicant and not based on commissions or any other factor that makes the agent's interests more important than those of the applicant

The Commissioner must request a hearing date no later than the 30 days after the applicant's request for the hearing.

idek

State and National Insurance Association Credit

max hours 4 not towards ethics requirement

General life, accident, and health agents must complete a minimum of ______ continuing education hours per renewal period. A 20 B 24 C 40 D 15

B; Agents must complete 24 continuing education hours every 2 years (per renewal period).

side note

An individual who holds a general life, accident and health, life agent, life and health counselor, adjuster, general property and casualty, or personal lines property and casualty license must complete 24 continuing education hours for all licenses during each two-year license period. Each individual must complete 2 hours of ethics as part of the 24 hours.

person may renew expired license if...

90 days or less

Who is NOT eligible for an agent license in this state? A A 17-year-old who passed the licensing exam 6 months ago B An applicant intending to be actively engaged in the business of insurance C An applicant intending to solicit insurance to the general public D A 43-year-old who submitted the appropriate application and fees 1 month ago

A; must be 18 or older

A licensed agent is required to obtain which of the following before transacting insurance in Texas? A A Certificate of Authority B An appointment from an insurer C An insurance counselor's license D A CLU designation

B; Licensed agents are not permitted to transact insurance as an agent until they have been appointed by an insurer authorized to transact insurance in this state.

What prohibited trade practice is committed if an agent provides misleading information regarding guaranteed dividends, terms, advantages, or disadvantages of a policy? A False advertising B Misrepresentation C Rebating D Defamation

B; Misrepresentation involves a false statement made to a policyholder about a policy to induce the policyholder to lapse, cancel, or surrender an existing policy.

To terminate an agent's appointment, the insurer must: A Require the agent to cancel the license with the Texas Department of Insurance B Notify the Texas Department of Insurance of the termination of appointment C Notify the Texas Department of insurance to cancel the license D Request a hearing through the Department of Insurance

B; The insurer must notify the Texas Department of Insurance of the termination of appointment, which does not cancel or terminate the license.

An individual may be denied a license by the Department for all of the following reasons, except if the individual has: A Been convicted of a felony B Obtained a license by fraud or misrepresentation C Actively engaged in soliciting and writing insurance for the general public D Offered a premium rebate to an insured

C; A license will not be denied for soliciting or writing insurance for the general public. This only applies when NOT actively engaged in soliciting or writing insurance to the general public.

The Commissioner may examine the records of an insurance company for the purpose of: A Approving coverages B Setting rates C Determining solvency D Approving claims

C; The primary purpose of examining the records of an insurance company is to review the financial condition of an insurer and determine solvency.

Life and Health Insurance Counselor

Charges a fee or other compensation to examine a life, accident, or health policy, annuity or pure endowment contract to provide advice or other information regarding: The policy, plan, or contract terms, conditions, benefits, coverage, or premiums The advisability of changing, exchanging, converting, replacing, surrendering, continuing, or rejecting a policy, plan, or contract from an insurer or health plan issuer Publicly uses a title (e.g. insurance adviser, analyst, counselor, or specialist; policyholders' adviser or counselor) that indicates the person is engaged in the business of giving advice or other information to any person having an interest in a life, accident, or health policy, health benefit plan, or annuity or pure endowment contract A Life and Health Insurance Counselor is prohibited from charging a fee for services IN ADDITION TO earning a commission on the products that he or she recommended to a client.

Holding which of the following professional designations will exempt a person from taking the life licensing examination? A Certified Financial Analyst (CFA) B Chartered Financial Consultant (ChFC) C Certified Insurance Consultant (CIC) D Chartered Life Underwriter (CLU)

D

Which of the following statements about continuing education is true? A Licensees must complete 24 continuing education hours for each license held B Every licensee must complete 3 continuing education hours on the topic of ethics C Continuing education hours must be completed after the expiration date of the license D At least 50% of continuing education hours must be completed in a classroom or classroom equivalent setting

D; At least 50% of continuing education hours must be completed in a classroom or classroom equivalent setting. Licensees must complete 2 hours of ethics (not 3), 24 CE hours per person (not per license) and they must be completed BEFORE the expiration date.

The Department may take the following disciplinary action in addition to any other remedy available under Texas Insurance Code, the insurance laws of another state, or any rule of the Commissioner:

Deny an application for an original license or a certificate that verifies an agent's qualifications to sell complex insurance products Suspend, revoke, or deny renewal of a license or a certificate that verifies an agent's qualifications to sell complex insurance products Place a licensee on probation if his/her license has been suspended Assess an administrative penalty Reprimand a licensee Require a licensee to qualify or requalify for a certificate to sell a particular insurance product or a complex insurance product line

The Department will collect a nonrefundable fee from each agent or insurer for the following:

License application fee Appointment fee for each appointment of the agent by an insurer Examination fees License renewal application fees

unfair methods of competition and/or unfair or deceptive acts or practices

Misrepresenting to a claimant a material fact or policy provision relating to coverage at the time of issue Failing to acknowledge within 15 business days, or reasonable promptness, pertinent communications with respect to a claim Failing to adopt and implement reasonable standards for prompt investigation of insurance claims Failing to attempt in good faith to promptly and fairly settle a claim in which the insurer's liability is reasonably clear Failing within a reasonable time to affirm or deny coverage of a claim, or submit a reservation of rights letter, to a policyholder Compelling policyholders to institute a lawsuit to recover amounts due by offering substantially less than the amount ultimately recovered in lawsuits brought by policyholders Failing to maintain complaint records pertaining to all complaints received by the insurer during the 3 preceding years Failing to promptly provide claim forms as stated in the policy when the insurer requires forms as a prerequisite for a claim settlement Failing to attempt in good faith to promptly and fairly settle a claim in which the insurer's liability is reasonably clear under one portion of a policy to influence settlement under another portion of the policy unless payment under one portion of the coverage amounts to evidence of liability under another portion Denying a claim without providing a reasonable explanation of the basis in relationship to the facts or applicable law for the insurer's denial Refusing or unreasonably delaying a settlement offer under first-party coverage because other coverage may be available to the insured or that third-parties are responsible for damages suffered Attempting to enforce a full and final claim release from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement Refusing to pay a claim without conducting a reasonable investigation of the claim Failing to respond promptly to a claimant who requested personal contact about, or a review of, a claim Delaying or refusing settlement of a claim under a Texas personal auto policy solely because another type of insurance is available to satisfy all or part of the loss; claimants have the right to choose under which policy to submit a claim and in what order to receive payment Requiring a claimant, as a condition of claim settlement, to provide federal income tax returns for review by the insurer unless the court orders production of the tax returns or the claim involves a fire loss or loss of profits or income Any other act as determined by rule of the Commissioner to constitute and unfair claim settlement practice

If a license has been expired for between 90 days to 1 year:

Person must file a new application with the Department, along with the license fee and an additional fee equal to one-half the license fee Person is NOT required to take a licensing exam

If a license has been expired for 1 year or more:

Take a licensing exam, if an exam is required for an original license Comply with other requirements and procedures for obtaining a new license

The Department will issue a license to a corporation or partnership if the following has been determined:

The corporation or partnership is organized under the laws of a state and authorized under the corporation or partnership to act as an agent At least one officer or one active partner and all persons transacting insurance are individually licensed by the department separate from the entity The corporation or partnership has the ability to pay any amount up to $25,000 it is legally obligated to pay to a customer and was caused by a negligent act, error, or omission The corporation or partnership intends to be actively engaged in the solicitation or writing of insurance for the general public and is actively engaged in the business of insurance Each business location acting under the authority of a license is registered separately with the Department An officer, director, member, manager, partner, or other controlling person of the corporation or partnership has not had a license suspended or revoked, been the subject of a disciplinary action by a regulator of any state, or committed an act for which a license may be denied

A Certificate of Authority is issued to an insurer for which of the following reasons? A It certifies the insurer is authorized to transact insurance in this state B It certifies the insurer has passed a market conduct exam in this state C It certifies the agent is authorized to transact insurance in this state D It recognizes the insurer for excellence in handling claims

A; The Certificate of Authority that gives the insurer approval to act as an insurer is effective until suspended or revoked.

If the insurer fails to comply with the cease and desist order, the Department may: (if insurer is in violation)

Revoke or suspend the insurer's Certificate of Authority Limit, regulate, or control the insurer's business activities with respect to the lines of business written, writing of policies and forms, and volume of business Require the insurer to pay reasonable attorney's fees to the Department

fiduciary duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

Under certain circumstances, the Department may discipline a licensee or deny a license application if the individual has:

Willfully violated a state insurance law Intentionally made a material misstatement in the license application Obtained, or attempted to obtain, a license by fraud or misrepresentation Misappropriated funds, converted funds to the individual's own use, or illegally withheld funds belonging to an insurer, HMO, or insured Engaged in fraudulent or dishonest acts or practices Committed a material misrepresentation of the terms/conditions of an insurance policy Committed a material misrepresentation, or incomplete comparisons, regarding the terms or conditions pertaining to an insurance policy for the purpose of inducing the owner to forfeit, surrender, or lapse the contract and replace it with another insurance policy or contract Been convicted of a felony Offered or given an insurance premium rebate or commission to an insured Has had an existing license revoked Not been actively engaged in soliciting or writing insurance for the general public as required by law (an agent cannot solicit insurance only from family members) Obtained, or attempted to obtain, a license for the primary purpose of writing controlled business

Defamation

the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance. Defamation includes the aiding, abetting, or encouragement of such a statement whether it is made verbally or in writing.

A licensed life insurance agent in Texas can share commissions with which of the following? A A person holding a temporary license B Another licensed life insurance agent in Texas who assisted with the sale C An insurance counselor who charged a fee for recommending the policy D A licensed property and casualty agent who referred the client

B; ^^ Insurance counselors cannot charge a fee and get paid commission and temporary licensees cannot get paid commission.

Which of the following is considered false advertising? A An agent misrepresents a policy provision relating to coverage at the time of issue B An insurance applicant misrepresents material information on an application for a license C An insurer exaggerates its dividends in statements published in a newspaper D A counselor charges a fee for advice in addition to commission for the sale of a policy

C; While all choices are considered violations, advertising only applies to untrue information placed before the public, such as in a newspaper.

Which of the following is NOT transacting insurance? A Indirectly acting as an agent B Delivering an insurance contract C Collecting an insurance payment D Selling stocks, bonds, and mutual funds

D; Transacting insurance involves activities relating to the business of insurance. Stocks, bonds and mutual funds are not insurance products.

Unfair Discrimination

Race, color, religion, or national origin Age, gender, marital status, or geographic location Disability or partial disability However, an insurer or health maintenance organization may consider marital status in defining persons eligible for dependent benefits.

An "agent" is NOT

A regular salaried employee or officer who: Devotes substantially all of his/her time to activities other than the solicitation of insurance applications Does not receive a commission or other compensation directly from the sale of insurance Does not solicit or accept insurance applications from the public An employer, employee, or trustee engaged in the administration or operation of an employee benefits plan if not directly compensated by the insurer issuing the contracts

It is an unfair method of competition to, with the intent to deceive:

File with a public official or to make, publish, disseminate, circulate, deliver, or place before the public a false statement of financial condition of an insurer Make a false entry in an insurer's book, report, or statement or willfully omit to make a true entry of a material fact relating to the insurer's business

To obtain a renewal license

the person must file with the Department a renewal application on the appropriate form and make payment for the required renewal fee AND an additional fee equal to one-half the renewal fee

Publishing or circulating information that is maliciously derogatory to the financial condition of an insurance company with the intent to injure is known as: A False advertising B Misrepresentation C Boycott, Coercion, and Intimidation D Defamation

D

fraudulent acts include:

accepting premiums for coverage that will knowingly not be provided, submitting a false claim or altered bill to an insurance company, or filing false statements with the intent to deceive.