Addendum: for use with Texas Life and Health, Property and Casualty, and Personal Lines online ExamFX courses and study guides per regulatory update effective September 1, 2017.
The following are content additions or revisions to supplement your existing text:
Texas Statutes and Rules Common to All Lines of Insurance
- Transacting Insurance – addition to the existing text:
The following acts, when performed by insurers or agents, constitute the business of insurance in this state:
- Making or proposing to make an insurance contract;
- Taking or receiving an insurance application;
- Receiving or collecting any consideration for insurance, including a premium, a commission, a membership fee, an assessment, or dues;
- Issuing or delivering an insurance contract;
- Directly or indirectly acting as an agent for an insurer; or
- Doing any kind of insurance business specifically recognized as constituting insurance business within the statutes of the Insurance Code.
- Certificate of Authority – addition to the existing text:
An insurance company must hold a certificate of authority issued by the Commissioner in order to transact insurance business in Texas. The certificate remains in effect until it is revoked, canceled, or suspended. If an insurer fails to file an annual statement required by law, the insurer's certificate of authority may be suspended or revoked by the Department.
- Commissioner of Insurance
- Investigations, Hearings, and Penalties – addition to the existing text:
If a person refuses to comply with a subpoena issued in connection with a hearing, a district court in the county in which the person resides may order the person to comply with the subpoena or testify. If a person refuses to comply with a subpoena, the court may punish the person's failure to obey as contempt.
A person who violates a cease and desist order of the Commissioner will be subject to an administrative penalty:
- $1,000 for each violation; or
- $5,000 for all violations.
If a person has been found by a court to have violated a cease and desist order, that person must pay a civil penalty of $50 or $500 for willful violations. The state may recover the penalty in a civil action.
- Licensing Requirements
- Types of Licensees
Corporations or Partnerships – new regulation on the outline
An agent license may be issued to a corporation or partnership if it has been admitted to transact insurance in this state, and has submitted the application and paid all the required fees. In addition, the following requirements must be met:
- At least one officer of the corporation or one active partner of the partnership is individually licensed separately from the corporation or partnership;
- An officer, director, member, manager, partner, or other person who has the right or ability to control the corporation or partnership has not had a license suspended or revoked or been the subject of any other disciplinary action by a financial or insurance regulator of any state in the United States, or committed an act for which a license may be denied;
- The corporation or partnership has the ability to pay any amount up to $25,000 on a claim or compensation for a negligent act, error, or omission;
- Each location from which the corporation or partnership will engage in business in this state is registered separately with the Department.
Intent to Actively Engage in Business of Insurance for General Public – new regulation on the outline:
Insurance licenses are issued with the intent that the licensee will engage in the business of insurance with members of the general public, and that the license will not be used primarily to earn commissions on personal business, from the licensee’s immediate family or close associates - known as controlled business.
In the state of Texas, at least 25% of a licensee's total volume of premiums in a calendar year must be from business other than controlled business (from persons other than the applicant and from property other than that on which the applicant controls the placing of insurance through ownership, mortgage, sale, family relationship, or employment).
- Marketing Practices
- Unfair/Prohibited Trade Practices
Fraud – addition to the existing text:
If a person suspects that a fraudulent insurance act has been or is about to be committed in this state, the person must report the information in writing to the Insurance Fraud Unit of the Department within 30 days. A report made to the insurance fraud unit constitutes notice to each other authorized governmental agency.
A person cannot be liable in a civil action, including an action for libel or slander, and a civil action may not be brought against the person for furnishing information relating to a suspected, anticipated, or completed fraudulent insurance act if the information is provided to any of the following:
- An authorized governmental agency or the department;
- A law enforcement officer or an agent or employee of the officer;
- The National Association of Insurance Commissioners;
- A state or federal governmental agency established to detect and prevent fraudulent insurance acts; or
- A special investigative unit of an insurer.
Texas Statutes and Rules Pertinent to Life Insurance Only
- Nonforfeiture Law – section revised as follows:
Nonforfeiture benefits are built into the policy and provide a guarantee that they cannot be forfeited by the policyowner. These guarantees are required by state law to be included in the policy.
There are state regulations that apply specifically to nonforfeiture benefits in individual and group life insurance policies and annuities that provide long-term care insurance. According to the state regulations, the nonforfeiture provision must be clearly captioned in the policy, and must provide for a benefit available in the event of a default in the payment of the premium. All insurers must offer at least one of the following nonforfeiture options:
- Reduced paid-up;
- Extended term; and
- Shortened benefit period.
A life insurance policy must ensure the following:
- That upon surrender of the policy no later than 60 days after the due date of a premium payment, the company will pay a cash surrender value (instead of a paid-up nonforfeiture benefit) if the premiums have been paid for at least 3 full years for ordinary life insurance policies, or 5 years for industrial life insurance;
- That a specified paid-up nonforfeiture benefit is effective as specified by the policy unless the eligible person elects a different option within 60 days after the due date of the premium; and
- That upon surrender of the policy no later than 30 days after the policy anniversary, the company will pay a cash surrender value if the policy is paid up or continued under a paid-up nonforfeiture benefit.
The insured has the right to accept or reject the nonforfeiture benefit. It is the agent's responsibility to provide information to the prospective policyowner to help him or her understand and accurately complete the rejection statement.
Any paid-up nonforfeiture benefit available under the policy on default in the payment of a premium due on a policy anniversary must be such that its present value as of the policy anniversary is at least equal to the cash surrender value available under that policy at that time, or if a cash surrender value is not available under the policy, the value that would have been required if there were no conditions that premium must have been paid for at least a specified period.