Texas Insurance Regulations Test

Texas resident agents must complete _____ hours of continuing education every two years.

Answer: 24 Explanation: Licenses renewing on or after September 1, 2015 require 24 hours of continuing education. Previously, an agent had to complete 30 hours of continuing education to renew their license every two years.

A Texas resident agent seeking to sell insurance to customers in another state needs:

Answer: A non-resident license in that state Explanation: It is not unlawful to sell insurance to customers in another state, as long as you have a non-resident license in that state, which are available without further exam since they are based upon reciprocal agreements between states.

Which of the following is NOT considered an unfair practice:

Answer: Paying dividends to policyholders out of a surplus accumulated from participating policies Explanation: Mutual insurers issue "participating policies," which might pay a dividend as stated in the policy. Dividends may never be guaranteed.

If an agent is convicted of a felony in this or another state, who do they have to notify:

Answer: The State Department of Insurance Explanation: An agent is required by law to report a felony conviction or any other adverse action taken against them in this or any other state to the Commissioner within 30 days. Insurance is regulated by state law, not federal. There is no Federal Department of Insurance.

Under the Unfair Claims Settlement Practices Act, which of the following is NOT unfair:

Answer: The denial of an unsubstantiated claim Explanation: Insurers do not have to pay 'unsubstantiated' claims, which means that the claimant failed to submit the required Proof of Loss.

What is the maximum time a Texas insurance agent's license may be issued for:

Answer: Two years Explanation: Licenses expire two years from the date of issuance.

When the Commissioner finds, after a hearing, that a person has intentionally violated an insurance regulation, what is the maximum fine that may be levied:

Answer: $25,000 Explanation: The key word here is "intentionally". Willful violations carry more serious penalties. The maximum fine for one willful violation is $25,000.

Circulating deceptive sales material to the public is what type of Unfair Trade Practice:`

Answer: Misleading advertising Explanation: This is considered to be false, deceptive or misleading advertising. Misrepresentation, for example, would be making a misleading statement concerning past or future dividends to be paid. Dividends may never be guaranteed.

The Insurance Commissioner shall examine each established, authorized insurer in Texas no less than:

Answer: Once every 5 years Explanation: All established, authorized insurers must go through a complete financial examination (audit) by representatives of the Commissioner's office at least once every five years, or more often as necessary to protect the public.

To become a Texas insurance agent, you must:

Answer: Pass an exam Explanation: All you have to do is pass your exam, apply for your license and pay the required non-refundable fees. However, passing the exam does not constitute a license. You cannot sell until your license is issued.

Which of the following is NOT prohibited under the Unfair Practices section of insurance law:

Answer: Readjusting group premium rates based on loss or expense experience Explanation: Rates for group insurance and for Workers Compensation are often based upon prior loss history, which is called experience rating. Discussing past dividends paid is okay, as long as they are not mis-stated. Making a false statement about the financial condition of a agent or insurer is known as defamation.

The type of government primarily concerned with the regulation of insurance and insurance companies is:

Answer: State Government Explanation: The states regulate insurance. The federal government only gets involved if the states fail to do so.

Sharing commissions is legal if:

Answer: The other party is licensed for the same lines of insurance you are Explanation: Compensating an unlicensed agent is illegal, but sharing commissions with someone who has the same type of license you do is okay.

What is the maximum period of time the Commissioner may revoke your agent's license:

Answer: There is no maximum time period Explanation: There is a difference between suspension and revocation. The maximum suspension is usually for 12 months, but a license can be revoked permanently. Neither action may be taken by the Commissioner without first granting the licensee an opportunity for a hearing.

If an agent's license is suspended or revoked, what happens to their accounts:

Answer: They continue in force Explanation: If an agent loses their license, their accounts are not affected.

Which of the following statements regarding temporary licenses is FALSE:

Answer: They may be renewed Explanation: Temporary licenses may be granted up to 90 days without examination to applicants who complete a 40 hour training course before applying for the license or within 14 days after applying for the license. A temporary license cannot be renewed.

A person appointed by an insurer to solicit or sell insurance on their behalf in this state is known as a(n):

Answer: Agent Explanation: Agents must be 'appointed' by each insurer that they represent. An agent represents the company, not the customer. An agent must have at least one appointment.

All are true about insurance licensing EXCEPT:

Answer: All accounts of a terminated agent must be non-renewed by the insurer Explanation: If you lose your job, your accounts will stay in force and will most likely be assigned to another agent who represents your company.

Conditions for a corporate agency seeking a Texas insurance agent's license include:

Answer: All active corporate officers must have individual agent's licenses Explanation: If you are actively selling insurance on behalf of a "business entity" that has an Agency Agents license, you need an individual agent's license as well. However, owners of the agency who are not selling insurance do not need to have a license, although their names must be disclosed on the licensing application. Agencies are often set up as partnership or corporations.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as:

Answer: Coercion Explanation: These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

To obtain a Texas license, you must do all EXCEPT:

Answer: Complete pre-license training Explanation: Most states require it, but not texas.

When the applicant passes the exam and qualifies in all other respects except for the fingerprint check by the FBI, the Department of Insurance will issue a license called:

Answer: Conditional Explanation: All new licenses are conditional upon a fingerprint check. If no problems are found, the conditional license automatically becomes a permanent license.

An agent who procures a license for the principal purpose of obtaining insurance for themselves, for family members or employees, violates the regulations prohibiting:

Answer: Controlled business Explanation: Controlled business is insurance you write on yourself, your family or your employees. You can write some controlled business, but you cannot get a license to principally do so.

Making false or malicious statements about the financial condition of an insurer or agent is what type of Unfair Trade Practice:

Answer: Defamation Explanation: Defamation is making oral or written statements which are false or maliciously critical of or derogatory to the financial condition of an insurer which are intended to injure any person engaged in the business of insurance.

All could be considered rebates EXCEPT:

Answer: Dividends Explanation: Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.

Temporary licenses issued in Texas generally:

Answer: Expire in 90 days Explanation: Temporary licenses expire in three months, or 90 days, and cannot be renewed.

If a license is revoked, the licensee shall NOT be eligible for a new license:

Answer: For at least 5 years Explanation: A revoked licensee must wait at least five years before attempting to re-qualify, and even then might not be successful.

Insurers applying for authority to do business in Texas are required to do all of the following, EXCEPT:

Answer: Maintain their home office in Texas Explanation: Most insurers do not have their home office in this state and are not required to.

Unfair claims practices will be assumed to be intentional if:

Answer: They occur with such frequency as to indicate a general business practice Explanation: The Commissioner keeps track of complaints regarding the handling of claims, and if it appears that an insurer violates the Unfair Claims Practices regulations with frequency, they could be penalized.