Texas Statutes and Rules Common to All Lines

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

Authorized or admitted

Is 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

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

Insurance company officers, directors, or any other employees who do not transact insurance and who not receive commissions for their services (usually, their responsibilities include administrative, executive or clerical).

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 associate.

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

Misrepresentation

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. The year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual

A license cannot be issued to an individual who has not done what?

Not passed the required licensing examination in the last 12 months, not paid the required fees to the department or is under the age of 18. Tax information of the application is not a reqirement for licensing

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are what?

Not taxable since the IRS treats them as a return of a portion of the premium paid.

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

Only producers properly licensed for the type of insurance transaction

What is the major difference between a stock company and a mutual company?

Ownership

Who might receive dividends from a mutual insurer?

Policyholders

Pertaining to insurance, what is the definition of a fiduciary responsibility?

Promptly forwarding premiums to insurance company

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

What is Fiduciary?

Refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

Stock

Who owns stock companies?

Stockholders

A license may not be denied, suspended, or revoked if the licensee does what?

Submits an unsigned insurance policy application

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

The Department of Insurance (Commissioner/Director/Superintendent)

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. When must the hearing take place?

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 costs associated with the examination of insurers?

The insurer who is being examined

What is a good example of a producer's fiduciary duty?

The trust that the client places in the producer in regard to handling premiums.

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?

There is no misconduct

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.

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

Twisting

Domestic

When doing business within the state in which it is incorporated

When would a misrepresentation on an insurance application be considered fraud?

When it is intentional and material

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)

No one whose license has been revoked can receive another license in Texas for how many years?

five years

What is the minimum percentage of a licensee's total volume of premiums in a calendar year that must come from business other than controlled business?

25%

The insurance Commissioner may examine the affairs of an insurer as often as necessary, but not less frequently than once every....

5 years.

When transacting business in this state an insurer formed under the laws of another country is known as an...

Alien insurer

When do CE hours need to be completed?

All CE hours must be completed during the reporting period; licenses are not allowed to carry over excess hours to the next reporting period.

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.

Who is considered a nonresident agent?

An agent who resides in another state, but is licensed to write insurance in Texas.

In Texas, how is the Commissioner of Insurance placed in office?

Appointed by the Governor for a term of two years.

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

Authorized

Commissioner

must have five years of experience in ine of the following occupations: an executive in the administration of business or government, a practice attorney, or a certified accountant.

How many hours of continuing education can be carried over from one licensing period to the next?

0

An insurer must acknowledge receipt of a Notice of Claim within how many days?

15 days

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

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

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contacts.

What is the closes term to an authorized insurer?

Admitted

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

Cease and desist order

A state-issued document empowering an insurance company to become an admitted insurer is called what?

Certificate of Authority

To legally transact insurance in this state, an insurer must obtain what?

Certificate of Authority

To legally transact insurance in this state, an insurer must obtain which of the following?

Certificate of Authority

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

Certificate of Authority

What must an insurer obtain in order to transact within a given state?

Certificate of authority

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

Domestic, foreign, and alien

What type of licensee represents the insurance company?

The agent

When cant he Commissioner or Director examine insurers?

Whenever deemed necessary, but at least once every few years

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

Complete continuing education hours and pay a renewal fee

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

Defamation

The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer's investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?

Delay an acceptance or rejection decision

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

Discrimination

Temporary licenses issued in Texas

Expire in 90 days

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

Fiduciary

The requirement that agent not commingle insurance monies with their own funds is know as what?

Fiduciary responsibility

What type of insurer is formed under the laws of another state?

Foreign

When doing business in this state, an insurance company that is formed under the laws of another state is known as what kind of insurer?

Foreign

In insurance transactions, fiduciary responsibility means?

Handling insurer funds in a trust capacity.

When a Cease and Desist Order is given how long does the process take?

If the recipient of a Cease and Desist Order wants to contest or review the charges in court, the request must be made within 30 days of the order. After the Commissioner receives the request, a hearing must occur within 10 days.

What are the different types of adjuster's licenses are available in this state?

all lines, property, casualty and surety, and workers compensation, employer's liability, U.S. Longshoremen's and harbor workers compensation insurance.

An insurance transaction

the carrying on of business in insurance, which could include the solicitation of a policy, advertising, negotiation, or inducement related to coverage of claims. Obtaining an insurance license is a prerequisite to transacting insurance.