Cease and desist
to stop or discontinue
Coercion
forceful act or threat aimed to influence a person to act against his or her will; an unfair trade practice in which an agent uses physical or mental force with the intent of inducing an applicant to purchase insurance
Commission
payment to the agent by the insurance company for placing insurance, usually percentage of the policy premium
Commissioner
the head of the State Department of Insurance
Except
not subject to an obligation
Home office
insurer's headquarters, principal place of business
Inducement
an offer that attempts to influence the other party
Insolvent
unable to meet financial obligations
Moral turpitude
conduct that is contrary to community standards of justice, honesty or good morals
Reciprocity
a mutual interchange of rights and privileges; a situation in which two parties provide the same help or advantages to each other (for example, Producer A living in State A can transact business as a nonresident in State B if State B's resident producers
Restitution
restoration to the original condition or repayment
Statute
a formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code
Transacting Insurance
includes any of the following (by mail or any other means):
- Solicitation
- Negotiations
- Sale (effectuation of the contract of insurance)
- Advising an individual concerning coverage or claims
Location of incorporation
Insurance companies are classified according to this (domicile); regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state
Domestic insurer
an insurance company that is incorporated n this state; in most cases, the company's home office is in the state in which it was formed (the domicile); for instance, a company chartered in Pennsylvania would be considered a Pennsylvania domestic company
Foreign insurer
an insurance company that is incorporated in another state or territorial possession (such as Puerto Rico, Guam or American Samoa); for example, a company chartered in California would be a foreign company within the state of New York
Alien insurer
an insurance company that is incorporated outside of the United States
Stock Companies
owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses; officers are elected by the stockholders and manage stock insurance companies; traditionally they issue nonp
Nonparticipating (stock) policy
does not pay dividends to policy owners; taxable dividends are paid to stockholders
Mutual companies
owned by the policy owners and issue participating policies; policy owners are entitled to dividends, which, in the case of mutual companies, are a return of excess premiums and are therefore nontaxable; dividends are generated when the premiums and the e
Certificate of Authority
insurers must apply for and be granted a license (or COA) from the state department of insurance and meet any financial (capital and surplus) requirements set by the state before they may transact business in a specific state; insurers who meet the state'
General Powers and Duties of Commissioner of Insurance
chief executive and administrative officer of the state Department of Insurance; must be a citizen of the state of Texas, be well informed and qualified in the field of insurance and insurance regulation, and have at least 5 years of experience in the adm
Examination of Records
Commissioner regulates insurance companies authorized to do business in this state; purpose of the examination of insurers' books and records is to ensure that the companies remain solvent and conduct business in compliance with state laws and regulations
Complaints
Commissioner and the Department are required to establish a program to facilitate resolution of policy owner complaints; if the department receives a written complaint, the department will notify each party of the complaint's status at least quarterly; de
Hearings
if the commissioner suspects that an insurer or its agent has committed a violation or is engaged in an unfair trade practice, the commissioner may issue a statement of charges and hold a hearing for any purpose deemed necessary
Emergency Cease and Desist Order
if commissioner believes any licensed agent is engaged in any form of unfair method of competition or trade practice, or that an unlicensed person is engaging in the sale of insurance, the commissioner may issue an emergency cease and desist order, served
Commissioner may impose an administrative penalty on a licensee who violates:
1. The Insurance Code
2. Another insurance law of this state
3. A rule or other adopted under the Insurance Code or another insurance law of this state
Penalty for a violation may not exceed $25,000 unless a greater or lesser penalty is specified by the I
Amount of Penalties
based on:
- The seriousness of the violation, including the nature, circumstances, extent, and gravity of the violation, and the hazard or potential hazard created to the health, safety, or economic welfare of the public
- The economic harm to the public
Other Remedies for violation of Insurance Code, another insurance law of this state, or a rule of the Commissioner
the department may:
- Deny an application for an original license
- Suspend, revoke, or deny renewable of a license
- Place on probation a person whose license has been suspended
- Assess an administrative penalty
- Reprimand a license holder
Violation
An insurer or agent is suspected of committing a violation or being involved in an unfair trade practice; commissioner is notified and may issue a statement of charges
Hearing
Aggrieved party may contest and request a hearing; advance notice of hearing; hearing held promptly; aggrieved party has a chance to be heard
Cease and Desist Order
Issued by the Commissioner (may also be issued before a hearing)
Other Penalties
Established by state laws; imposed based upon hearing outcome; license denial/suspension/revocation; monetary fines
Agents (types of licensees)
any person who solicits insurance on behalf of any insurance company, takes or transmits (other than for himself/herself) an insurance application or policy, examines any risk or loss, or receives, collects, or transmits any premium; normally compensated
License to an individual applicant
Department can issue a license to an individual applicant who meets all of the following requirements:
- Is at least 18 years old
- Has passed the required licensing examination in the last 12 months
- Has submitted the application, required fees, and any
Nonresident Agent
one who resides or is domiciled in a state other than Texas; can be licensed as an insurance agent if the Texas licensing requirements are met, as long as the agent's home state gives Texas residents the same privilege (reciprocity); applicant must hold a
Reciprocal Agreements
Commissioner can enter into RA's with officials of other states to waive the written examination requirements for applicants who reside in those states, as long as the following conditions are met:
- The other state requires agent licensing applicants to
Counselor
any person who, for a fee or commission, offers to examine a life, accident, or health insurance policy, an annuity, or pure endowment policy, to give a recommendation or information regarding the policy's terms, conditions, benefits, coverage or premiums
Temporary
not renewable and cannot be issued more than once in any 6-month period to the same applicant; cannot sell insurance that replaces an existing individual life insurance policy or annuity contract that is in force; limitation does not apply to temporary ag
Exemptions/Exceptions
an insurance agent license is not required of any officer, director, or employee of an insurer or organizations employed by insurers, provided they are not directly or indirectly involved with the actual sale of an insurance contract and do not receive an
Renewal of License
agent's license must be renewed every 2 years on the licensee's birthday, either on even-numbered or odd-numbered years depending on when the license was issued, and will continue in effect until refused, revoked or suspended by the Commissioner
Expiration
Commissioner will send an agent whose license is bout to expire notice of such expiration at least 30 days before that date; if an agent allowed his/her license to expire, the following reinstatement rules apply:
- If expired for no more than 90 days, the
Continuing Education (CE)
CE rules are established to protect the public by maintaining high standards of professional competence in the insurance industry, and to maintain and improve the insurance skills and knowledge of licensed producers; licensees must complete 24 hours of co
Denial of License
Commissioner may discipline a license holder or deny an application to anyone who has done any of the following:
-Willfully violated any provision of the Texas Insurance Code
-Intentionally made a material misstatement in the licensing application
-Obtain
Surrender of License
will not negate any offense committed before the surrender's effective date; surrendering the license will not keep the agent from being penalized; Commissioner will suspect/revoke an existing license, or deny a new license for:
-Willful violations of sta
Petition for reinstatement/issuance
should be filed with the associate commissioner and must include:
-The date of final conviction and/or the date the sentence or probation terminated
-The reasons why the petitioner believes the license should be issued or reinstated
Unfair/Prohibited Trade Practices (Marketing Practices)
insurers and insurance producers may not engage in any trade practice that is defined as, or determined to be, an unfair method of competition or an unfair or deceptive act of practice in the business of insurance; knowingly commit an unfair method of com
Misrepresentation
committing the illegal act of issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc.; also refers to oral statements
False Advertising
violating the rule of including any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it; specifically includes:
- Terms, benefits, conditions, or advantages of any insurance policy
- Any dividends
Defamation of Insurer
occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business; also applies to statements that are maliciously critical of the financial condition of any person or a company
Rebating
any inducement offered to the insured in the sale of insurance products that is not specified in the policy; both the offer and acceptance of a rebate are illegal; may include, but are not limited to:
-Rebates of premiums payable on the policy
-Special fa
Boycott, Coercion, and Intimidation
illegal to be involved in any activities of these that is intended to restrict fair trade or to create a monopoly; would include unfair behavior that influences not only clients, but competing agents and brokers
Coercion is to require, as a condition to a
Fraud
the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party; grounds for voiding an insurance contract; TX Department of Insurance h
Prompt Payment of Claims
claims must be settled promptly; no later than the 15th business day following a receipt of a notice of a claim, the insurer must do the following:
1. Acknowledge receipt of the claim
2. Begin an investigation of the claim
3. Request all statements, forms
Department of Insurance Regulations
-2 years: Commissioner's term of office
-5 years: Administration, attorney, or CPA experience required before applying to become the Commissioner
-30 days: For agent to request a hearing after receiving a cease and desist order
-10 days: After receiving t
Licensing and Appointment Requirements
-18: Minimum required age for licensing
-12 months: Results of the licensing examination are valid
-90 days: Maximum duration of temporary licenses
-6 months: no more than one temporary license issued per person
-2 years: Duration of reporting period
-5 y
Miscellaneous Producer Regulations
-90 days: after license renewal date for agents to pay fees and complete CE before license expires
-24 hours: CE to be completed during each reporting period
-2 hours: minimum requirement for ethics training
Important Dollar Amounts
-$50: Maximum agent licensing fee
-$25,000: Maximum fine for violating the Insurance Code
-$2,500: Fine for willful violation of the Fair Credit Reporting act
Agent Regulation
-Only one license of the same type is allowed per agent
-Must be licensed in the line of authority for which the agent transacts insurance
-Avoid unfair trade practices
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
Answer: B;
Dividends paid to policy holders of a mutual insurer are not considered to be a rebate becaus
Which of the following must an insurer obtain in order to transact insurance within a given state?
Certificate of Authority
An applicant properly notifies her insurer of a straightforward claim, but the insurer waits an exceedingly long time to process it. Which of the below terms best describes the behavior of the insurer?
Unfair claims settlement practice;
If an insurer knowingly or frequently commits an act that neglects or deceives an insured, its behavior falls under the category of unfair claim settlement practice. In this instance, there is no reason why the insurer w
A temporary license holder can receive a commission from a sale made to all of the following EXCEPT:
A. An accountant at a rival insurance company
B. The license holder's family doctor
C. The license holder's sister-in-law
D. The license holder's spouse's best friend
Answer: C;
A temporary license holder sale to a family member or an individual the tempo
An insurance agent wants for a client to replace her current annuities plan with another one. He presents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. The policy owner ends up
Twisting;
Twisting is an illegal act, in which an agent misrepresents the terms of an insurance or annuities contract or draws incomplete comparisons, in a way that would compel the insured to surrender the contract for the new one
All of the following would be considered an insurance transaction EXCEPT:
A. Obtaining an insurance license
B. Soliciting a policy
C. Advising a policy holder regarding a claim
D. Negotiating coverage
Answer: A
The Commissioner has full power and authority to do all of the following EXCEPT:
A. Enforce the Insurance Code
B. Issue cease and desist orders
C. Draft insurance laws
D. Issue Certificates of Authority
Answer: C
On a participating insurance policy issued by a mutual insurance company, dividends paid to policy holders are:
Not taxable since the IRS treats them as a return of a portion of the premium paid
How long must producer maintain records of continuing education course completion?
4 years