TX Statutes & Rules

Which of the following is NOT a possible penalty for a violation of the Insurance Code? A Payment of restitution B A cease and desist order C A fine up to $100,000 D An administrative penalty

A fine up to $100,000

Which of the following is another term for an authorized insurer? A Legal B Admitted C Certified D Licensed

Admitted

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? A Defamation B Illegal C A legal advertising strategy D Unfair Discrimination

Illegal

In general, who can be excluded from producer licensing and examination requirements?

Insurance company officers, directors, or any other employee who do not transact insurance and no commissions for their services

What is controlled business?

Insurance on the producer's own life or property, or the lives or property of the producer's family or business associates

In the agent/insurer relationship who is considered the principal?

Insurer

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

Misrepresentation

The following are all causes for the Insurance Commissioner to suspend or impose conditions upon the continuance of an agent's license EXCEPT A Misappropriation or illegal withholding of the policyholder's money. B Obtaining a license through fraud. C Conviction of a felony involving moral turpitude. D The applicant has been shown to be a poor personal credit risk.

The applicant has been shown to be a poor personal credit risk.

When can the Commissioner or Director examine insurers?

Whenever deemed necessary but at least once every few years

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contracts

Who must be a member of insurance guaranty associations?

All insurers authorized to write insurance within a state

Anyone who violates the Insurance Code of Texas may be fined up to A $20,000. B $25,000. C $5,000. D $10,000.

$25,000.

If an agent has completed 35 hours of continuing education in one renewal period, how many CE hours will the agent have to complete in the next renewal period? A 35 B 0 C 11 D 24

24

All of the following statements about the continuing education requirement in this state are true EXCEPT A It does not allow excess credit hours to be carried forward to the next reporting period. B Hours may be completed using independent self-study courses or classroom study. C It requires satisfactory completion of 24 hours of approved training every 2 years. D All licensed agents must comply by January 1 of even-numbered years.

All licensed agents must comply by January 1 of even-numbered years.

All of the following would be considered rebating EXCEPT A An agent misrepresents policy benefits to convince a policyowner to replace policies. B An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. C An agent offers to share his commission with a policyholder. D An agent offers tickets to a baseball game as an inducement to buy insurance.

An agent misrepresents policy benefits to convince a policyowner to replace policies.

Who is considered a nonresident agent?

An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state

What is a foreign insurer? A An insurer with licensed agents who are citizens in more than one country B An insurer with a home office in another state C An insurer with a home office in another country D An insurer with licensed agents doing business in other countries

An insurer with a home office in another state

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Authorized or admitted

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Authorized or admitted

What document is required for an insurance company to transact insurance?

Certificate of Authority

What are producers required to do in order to renew their license?

Complete continuing education hours and pay renewal fee

Who can usually be granted a temporary license?

Producer's spouse or designee in case the licensed producer dies or becomes disabled

The Commissioner of Insurance issues a Cease and Desist Order and immediately receives a request for the charges to be reviewed in a hearing. Within what number of days must the hearing be held? A 10 B 14 C 30 D 60

10

What are the most common penalties for violations of insurance statutes?

A cease and desist order, a fine and license suspension or revocation

If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?

Cease and desist order

If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?

Defamation

Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination

Insurers are classified according to their domicile. What are the three types of insurers?

Domestic, foreign and alien

An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?

Rebating

Who must be notified of a producer's change of address?

The Department of Insurance (Commissioner/Director/Superintendent)

What type of licensee represents the insurance company?

The agent

To whom may a certificate of authority be issued?

To an insurer authorized to transact business in this state

What is the purpose of a cease and desist order?

To prevent a producer or insurer from further violating laws for transacting insurance

What is the purpose of insurance guaranty associations?

To protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers

What type of licensee represents the insured?

broker

Who owns stock companies?

stockholders

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT A An offer to share in commissions generated by the sale. B Dividends from a mutual insurer. C An offer of employment. D Stocks, securities, or bonds.

Dividends from a mutual insurer.

For what reason can a temporary license be issued?

For continuation of business in case the licensed producer dies or becomes disabled

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A Nonprofit service organization B Stock C Mutual D Reciprocal

Mutual

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

No, advertising of the existence of the guaranty association for the purpose of solicitation

Who may share in the commission from the sale of a life insurance policy?

Only producers properly licensed for the type of insurance transaction

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true? A The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date. B The judge will determine when the hearing will be held. C The hearing date can be set for any time within the next year, unless both parties agree to a later date. D The hearing must be set for exactly 10 days after the request is made.

The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.

Who is responsible for the contents of insurance advertisements?

The insurance company

Who is responsible for the cost associated with the examination of insurers?

The insurer who is being examined

What percentage of continuing education hours must be in a classroom setting? A 25% B 50% C 75% D 100%

50%

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A Domestic B Unauthorized C Foreign D Alien

Foreign

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?

Misrepresentation

What type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

Twisting

When is controlled business legal?

When the commissions from controlled business do not exceed the aggregate commissions on all the other business (specific limits may vary from state to state)