Texas Statutes — Common to P&C

Correct

The answer is B: The insurer's agent, whoever engaged the person to act

Under Insurance Code §4001.051(b), a person who solicits insurance for an insurer, receives or transmits an application or policy, collects or transmits a premium, or does any of the other listed acts is that insurer's agent for purposes of the liabilities, duties, requirements and penalties of the licensing title. That holds regardless of whether a broker or some other person requested or employed the person to act. Texas defines an agent by the acts the person performs (§4001.003(1)), so the label 'broker' or the identity of whoever engaged the person does not avoid agent duties.

Source: Insurance Code §4001.051(b) · Insurance Code §4001.003(1)

Correct

The answer is C: Remit them to the insurer as the agency contract requires

Premium an agent collects belongs to the insurer or the insured, not to the agent, and the agent must pay it over as the agency contract provides. Misappropriating, converting or illegally withholding it is a ground for license discipline (Insurance Code §4005.101(b)(4)), and an agent who embezzles or fraudulently converts premium is punished as if the agent had stolen it (§4005.153). Many agency contracts also require premium to be kept in a separate trust account, apart from personal and operating funds, which is sound practice. A managing general agent must by statute deposit the money it collects in an escrow account and holds it in a fiduciary capacity (§§4053.105, 4053.106).

Source: Insurance Code §4005.101(b)(4) · Insurance Code §4005.153 · Insurance Code §4053.105

Correct

The answer is A: Premium finance companies must be licensed by TDI

Premium financing is legal and regulated in Texas under Insurance Code ch. 651. A person may not engage in the business of financing insurance premiums unless licensed by TDI (§651.051). A premium finance agreement must be in writing on a form the commissioner approves and must disclose the finance charge and the annual percentage rate (§§651.151, 651.152). If the insured defaults, the finance company may have the policy cancelled only after mailing the insured a written notice that sets a cure date no earlier than the 10th day after mailing (§651.161).

Source: Insurance Code §651.051 · Insurance Code §651.151 · Insurance Code §651.161

Correct

The answer is A: TDI's authority to examine any insurer authorized in Texas

Under the Texas Insurance Code, TDI examines each insurer organized in Texas and each other insurer authorized to do business in Texas, including its financial condition and ability to meet its liabilities (§401.051). Examinations verify that the insurer maintains adequate reserves, follows proper accounting practices, and complies with solvency requirements. TDI examines as often as it considers necessary and at least once every five years (§401.052).

Source: Insurance Code §401.051 · Insurance Code §401.052

Correct

The answer is B: Issue an emergency cease and desist order without a prior hearing

When a licensed person is committing an unfair act under Insurance Code chapter 541 or 542, such as misrepresenting a policy to clients, and the conduct is fraudulent, hazardous or likely to cause imminent public injury, the Commissioner may issue an emergency cease and desist order ex parte, meaning before any hearing (§83.051; 28 TAC §1.901). The order requires the person to stop immediately and stays in effect pending any hearing the person requests; it becomes final on the 61st day after service unless the person requests a hearing (§§83.051(b), 83.052, 83.055). Suspending or revoking the agent's license for misappropriating premium is separate discipline, and the agent is entitled to a hearing at the State Office of Administrative Hearings before it is imposed (§§4005.101(b)(4), 4005.102, 4005.104).

Source: Insurance Code §4005.101(b)(4)

Correct

The answer is C: Forcing insureds to sue

The Unfair Claim Settlement Practices Act prohibits compelling a policyholder to institute a suit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder (Insurance Code §542.003(b)(5)). This practice delays rightful claim payments and imposes unnecessary costs on policyholders. Insurers must also attempt in good faith to effect a prompt, fair and equitable settlement when liability has become reasonably clear (§542.003(b)(4)).

Source: Insurance Code §542.003(b)(5) · Insurance Code §542.003(b)(4)