Texas Property & Casualty License

Property vs Casualty: What is considered property?

Structure & Personal Property

Property vs Casualty: What is considered casualty?

Non-property losses. Legal liability to others. 3rd Party

Risk

uncertainty of financial loss

Pure Risk

Chance of Loss

Speculative Risk

Chance of Loss or Gain (Gamble)

Insurance (covers which type of risk?)

Pure Risk Only

How does the law of large numbers apply in insurance?

Actuaries use the law of large numbers to estimate claims

What is the law of large numbers?

as the number of a similar loss exposure increases, the more accurate claims can be predicted from the group.

What is a peril?

cause of loss

What is a hazard?

things that increase the chance of a peril happening

Three types of hazards

Physical: visible characteristic (dead tree)
Moral: Dishonest tendencies
Morale: Attitude of carelessness

Proximate Cause

First cause in an unbroken chain of events

Elements of a legal contract (CALC)

C - Competent parties (18/Right frame of mind)
A - Agreement (Both parties agree)
L - Legal Purpose (The risk is LEGAL)
C - Consideration (It has to be fair)

What is representation?

Information believed to be true.

What is misrepresentation?

Information that is not true. False information.

What is material misrepresentation?

Information that is not true but would have caused the insurer not to issue the policy. (4 prev spd tix)

What is fraud?

An all out effort by one party to deceive and cheat the other.

What is warranty?

Guarantee that an insured will or will not do something

What are the four major parts to an insurance policy structure? (DICE)

D - Declarations Page (First Page)
I - Insuring Agreement (Insurers promise to pay)
C - Conditions (Rules)
E - Exclusions (Not covered)

What information is on the declarations page? (Remember 6 Ps)

Policy Number
Parties
Property Description/Location
Policy Term
Policy Limits/Deductibles
Premium

What is Limit of Liability?

The max amount of coverage agreed to be paid per loss

What is Aggregate Limit?

The max amount of the total of all claims paid per policy period

Insuring Agreement?

Insurers promise to pay

Conditions

Contains the duties and rights of both parties

What are the Insured's duties after a loss?

Submit a proof of loss or sworn statement within 91 days. Protect property from further damage. Cooperate with the insurer.

What is the Mortgage Clause?

Nothing the insured does, even dishonestly, can prevent the mortgagee from collecting under the policy

What are the two types of termination of a policy?

Cancellation - occurs when the insured/insurer cancels the contract before the end of the policy period.
Non-Renewals - occurs at the end of the policy period.

Cancellation Requirements

Insurer - must provide a 10 day advance written notice to the insured that the policy will be cancelled.
Insured - no notice required

Non-Renewal Requirements

Insurer - must provide a 30 day advance written notice to the insured.
Insured - no notice required

Arbitration

Deal with disagreements on coverage issues

What is "Other Insurance"?

This provision applies when the insured has more than one policy covering the same loss

Primary & Excess

Primary pays to limit
Excess pays what is left

Pro Rata

Primary pays their percentage of loss
Other insurance pays their percentage of loss

What does vacant mean?

Empty building. No people/No contents for 60 days.

What does unoccupied mean?

No people present when loss occurs but contents still remain.

Abandonment

insured cannot abandon partially damaged property and expect to be paid for its full value

What is salvage value?

after paying the insured for a loss as if it was totally destroyed the insured must give the insured what's left.

What is the most common casualty coverage?

Liability (3rd party)

What is the definition of liability?

Individual or organizations maybe held responsible for action resulting in bodily injury or property damage to others.

What are the two types of liability?

Criminal & Civil

What is a tort?

A civil wrong

Direct Liability

Insured is the wrongdoer (Tortfeasor)

Vicarious Liability

Insured is responsible for the actions of the wrongdoer

Contractual Liability

Insured assumes another's liability under a written agreement

Absolute Liability

Liability without fault (Child drowns in pool)

Strict Liability

Product defect claims

Negligence

Failure to do or not to do something that ordinarily should be or not be done that results in a loss

Legal Duty

Owe an obligation to act or not act

Breach of Duty

Failure to comply with a duty

Actual Loss

Another suffers a loss

Proximate Cause (Regarding Duties)

Breach of duty is the direct cause of loss

Bodily Injury

Injuries including pain and suffering

Property Damage

Damages including loss of use

Personal Injury

Damage to a persons character or reputation

What is an accident?

an event that is sudden and unexpected

What is occurrence?

an event that happens over time

Compensatory Damage

To indemnify the injured party

Punitive Damages

To punish the wrongdoer due to gross negligence

Domestic

Same state

Foreign

Another state

Alien

Another country

Stock Insurers

Owned by stockholders/shareholders
For profit company

Mutual Insurers

Owned by policyholders
Incorporated/Managed by board of directors chosen by policy holders

Self-Insurance

Business organizations that set up their own savings accounts to pay for their own claims, property damage, or liability.

Residual Markets

Government (Fed & State) help provide insurance that is not ordinarily available from private insurers.
Fed Ex. National Flood Insurance Program (NFIP) and Federal Crop and Hail Insurance
State Ex. Texas Auto Insurance Plan Assoc (TAIPA), Texas Windstorm

Three Federal Regulation Sources

Fair Credit Reporting Act
Terrorism Risk Insurance Act
Gramm Leach Bliley Act

Fair Credit Reporting Act

to protect consumers when adverse action (increase in rates) resulting from review of credit

Terrorism Risk Insurance Act

has to be certified by sec of state, sec of treasury, and attorney general as an eligible act not the president.
Will not pay more than 100 billion in aggregate.

What does the commissioner do?

Runs the Texas Department of Insurance (TDI)
A new commissioner is appointed by the governor for 2 yr term, ending Feb 1st of each odd numbered year.

Investigations and Examinations by the Commissioner

At least once every five years or more often if deemed necessary

What is the Texas Property and Casualty Insurance Guaranty Association

Protects claimants and policy holders in the event of insurer insolvency (cannot pay claims).
Governed by a board of directors - 5 members from insurers and 4 members from the public

Private Companies not TDI that publish the financial strength ratings include:

A.M. Best (A++ to F)
Moody's
Standard and Poor's

Definition of agent

Anyone who solicits insurance or aids in placing risk, delivering policies, or collecting policies on behalf of an insurance company.

Temporary Agents License

Issued for period of 90 days; No renewal
Only 1 every 6 months
Cannot be paid any commission for sales
Must have a company or agent sponsor
Must complete 40hrs of study within 14days of applying for the license
No test required

License Renewals

Most renew every 2 years on anniversary date
If license lapse:
-May renew within 90 days, subject to $50 late fee penalty
-If license expires after 90 days, may apply for new license without having to retest, up to 1 yr following the expiration
-After one

Continuing Education

30 hrs required during license cycle
50% Classroom setting/ Classroom equivalent
2 hrs of Ethics
Keep records for at least 4 yrs in case of audit
No grace period given for completing continuing education

Termination of Appointment

If an agency contract has been in place for two years or longer agent is entitled to a 6 months advanced notice.
Reason for termination must be provided

Examples of License Revocation or Renewal Refused

-Violation of insurance laws
-Misappropriation of funds or defraud a policyholder(cannot reapply for five years)
-License suspension - stopped from selling for period of time
-Failure to complete continuing education, $50 fine per hour not completed
-Perf

Twisting

Using misrepresentation to induce a person to drop existing insurance coverage and purchase new insurance with a new producer and company when it is not in the best interest of that person

Defamation

Making oral or written statements that are false, malicious, or derogatory to the financial condition of any insurer or agent

Disparagement

Dishonesty about competition including their services or business methods

Adjusters must meet the following time requirements in Texas

-15 days to acknowledge claim, commence investigation and request all information (Proof of loss notice)
-15 business days to accept or deny the claim, once all required information is received
-5 business days to write the check after liability is determ

Persons Insured

Any person driving with the insureds permission
Includes residents spouses permission

Part A (personal auto policy)

Liability

Part B one (personal auto policy)

Medical Payments

Part B two (personal auto policy)

Texas Personal Injury Protection

Part C (personal auto policy)

Uninsured and Underinsured Motorist

Part D (personal auto policy)

Damage to your auto

Bodily Injury (personal auto policy)

Bodily harm, sickness or disease including death

Bodily Injury covers injuries caused by the insured including what?

Medical Expenses, Lost Wages, Pain & Suffering

Property Damage (personal auto policy)

Includes physical injury to, destruction of, or loss of use of tangible property

Property damage covers damages caused by insured including what?

Damage to another vehicle, damage to a building, damage to a wall or fence

Minimum Limits of Liability in Texas

30/60/25
30,000 bodily injury per person
60,000 bodily injury per accident
25,000 for damage per accident

Types of Supplementary Payments (personal auto policy)

Bonds - premiums for appeal and bail bonds (up to $250)
Loss of Earnings - up to $200 per day, if insured misses work due to trial

Liability Exclusions

Use of vehicle without permission
Use of vehicle used as a public or taxi transporter
Use of vehicle in prearranged racing or speed contest
Loss caused intentionally by the insured
Damage to property owned or being transported by the insured
Motorized veh

Other Insurance Clause

Any insurance the company provides for a vehicle that is not owned by the insured will be considered excess to other insurance

Medical Payments

Pays for:
Insured occupying an auto or as a pedestrian
Pays regardless of fault up to three years
Minimum limit is $500 per person

Texas Personal Injury Protection (PIP)

Pays for:
Insured occupying an auto or as a pedestrian
Insures the guest passenger
Pays regardless of fault up to three years
Medical and funeral expenses
80% of lost wages OR essential services
A person cannot collect both lost wages and essential servic

Uninsured Motorist Coverage

Provides coverage when at-fault third party does not carry liability insurance
Includes hit and run
Physical contact with another vehicle must occur

Underinsured Motorist Coverage

Provides coverage when at-fault third party does not carry enough liability insurance

Uninsured/Underinsured Coverage Limits

Min 30/60/25 or combined single limit of $85,000
Must be included in all liability policies issued in Texas unless the insured rejects the coverage in writing

Collision (Physical Damage)

Covers specified perils only (collision with another veh or object)
Upset of the vehicle (overturned)
Exclusions:
-Sound and video equipment - unless permanently installed. If permanently installed - $1500 max.
-Personal property in the car
-Customized eq

Comprehensive Loss

Covers Fire, Explosion, Wind, Hail, Earthquake, Flood, Vandalism, Theft, Glass Breakage, Contact with bird or animal

Transportation Expenses Coverage

If you have comprehensive coverage and have a total theft, you can get $20/day max $600 per loss after 48hrs of loss

Newly Acquired Vehicles

If you have comp/coll = automatic coverage is provided for 14 days. (Must notify within 14 days)
If you have no comp/coll = only covered for 4 days with broadest coverage on policy. (Must notify within 4 days)

Auto Policy - Insurer Cancellation

Insurer can only cancel within 60 days with underwriting reason or non-payment and 10 day notice to insured.
After 60 days - Insurer can only cancel with 10 day notice for non-payment, DL suspended/revoked, fraudulent claim, or veh registration suspended/