Texas Licensing Exam |818 Questions with
Solutions
Duties of the Department of Insurance - -The Texas Department of
Insurance (TDI) regulates the state's insurance industry. TDI is responsible
for enforcing insurance laws passed by the legislature and for developing
rules and regulations to aid in that enforcement.
TDI is responsible for:
-issuing certificates of authority to insurers wishing to market insurance
products in Texas (it is illegal for an insurer to transact insurance business in
Texas without a certificate of authority);
-overseeing the marketing practices and solvency of the insurers that are
authorized to do business in the state of Texas;
-establishing product standards, including required and prohibited provisions
in insurance contracts;
-licensing producers to sell insurance products;
-conducting investigations to determine whether there have been violations
of insurance law;
-making reasonable rules and regulations necessary to implement Texas
insurance laws;
-taking legal action to enforce the law, including issuing cease and desist
orders and imposing penalties on violators;
-administering the state's workers compensation system; and
-protecting consumers and ensuring fair competition in the insurance
industry.
- Commissioner as Department Chief - -TDI is headed by the Commissioner
of Insurance, who is the department's chief executive and administrative
officer. The Commissioner is appointed by the governor and serves a two-
year term.
- Powers and Duties of the Commissioner - -As the head of the state's
Insurance Department, the Commissioner is responsible for enforcing and
administering all laws pertaining to insurance in the state of Texas, as well
as other laws that grant jurisdiction to the TDI or apply to the TDI or to the
commissioner. The Commissioner derives authority from the Insurance Code
and other state insurance laws and from Title 5 of the Labor Code and other
Texas workers compensation laws.
- Insurer Impairment Prohibited - -Once an insurer is issued a license and
becomes admitted, different state regulations require it to maintain
minimum amounts of working capital on a going-forward basis.
TDI examines the financial condition of companies licensed in Texas and
requires insurers to maintain specified levels of surplus. TDI also publishes
company profiles that show a company´s complaint record and other useful
,information, including enforcement actions taken against the company and
company history.
- Insurer's Deposit with Comptroller - -An insurer may voluntarily deposit
funds with TDI as a condition to transacting business in Texas if it is required
to do so in its home state. TDI will hold these funds for the protection of the
insurer's policyholders and creditors. When the Commissioner is assured that
there is no longer a need to hold the deposited funds, they may be returned
to their owner.
- Insurer's Reserve Computed - -TDI will compute the reinsurance reserve
necessary for all risks that an authorized insurer is covering in the state.
- Reinsurance Reserve - -a fund providing for the return of unearned
premiums on policies that are canceled
- Unearned premium - -The portion of the policy premium that has not yet
been "earned" by the company because the policy still has some time to run
before expiration.
- Complaint - -*Any written communication to an insurer, not solicited by
the insurer, expressing a grievance relating to an unfair claims settlement
practice.
If a written complaint is filed with TDI, the department will notify each
complaining party of the status of the complaint at least once per quarter
unless giving the notification would jeopardize an undercover investigation.
The department will keep records of every complaint it receives.
- Electronic Transfers - -Among the Commissioner's duties is the
responsibility for handling any funds from penalties, fees, or other sources
held for the benefit of the state, including the duty to use electronic means
to transfer any funds over $500,000.
- Market Conduct Exam - -*An investigation by insurance regulators to
determine if an insurer has followed state laws relating to marketing,
advertising, sales, underwriting, rating, and claims handling practices.
-State regulation is not uniform. What is allowed in other states may not be
allowed in Texas
-The examination focuses on general business patterns or practices of an
insurer, not just specific errors.
- Code Enforcement - -The insurance code authorizes the TDI to address
reasonable inquiries to insurance companies or other authorized insurance
representatives concerning matters necessary to discharge the TDI's duties
,or other matters that the TDI considers necessary for the public good or for
the public good.
- Penalties - -The insurance commissioner may revoke or modify the
certificate of authority of any carrier that fails to meet the legal requirements
under which the certificate is granted. At least 10 days' advance notice of
this revocation or modification, the commissioner must notify the carrier of
its intentions and state a specific reason for the action.
Types of violations:
- Willfully violated a state insurance law
- Intentionally made a material misstatement on the license application
- Attempted to obtain, or actually obtained, a license by fraud or
misrepresentation
- Misappropriated, converted, or illegally withheld money belonging to an
insurer, an insured, or a claimant
- Engaged in other fraudulent or dishonest acts or practices
- Materially misrepresented the terms and conditions of an insurance policy
- Encouraged a policyholder to surrender or replace an existing policy by
inaccurately comparing its terms or conditions
- Been convicted of a felony
- Offered a rebate or kickback to an insured
- Sought or obtained an insurance license primarily for the purpose of
insuring himself, a member of his family, or a business associate rather than
insuring the general public.
- Continuing Education - -Many states that require licensing also require a
specified number of continuing education (CE) credits in order to renew the
license. CE is important for adjusters because new state laws and court
decisions frequently affect how claims are handled or who is covered under
various insurance policies.
- Adjuster - -In Texas, any person who adjusts insurance claims for an
insurance company. Anyone supervising claims handling is also considered
an adjuster. The adjuster may be an individual, operating as an independent
contractor, or an employee of any of the following:
adjustment bureau
association
insurance agent
independent contractor
insurance company
managing general agent (MGA)
- Not an Adjuster - -- an attorney
- an insurance company's salaried employee who does not regularly adjust,
investigate, or supervise insurance claims
, - any party, such as an attorney, engineer, photographer, or a private
detective, hired only to provide technical assistance to a licensed adjuster
- an insurance agent who processes undisputed or uncontested claims for
the insurer
- a clerical claims department or agency employee who does not negotiate
claims
- a person who handles, life, accident, and health claims (This exemption
does not apply to workers compensation claims)
- someone who handles easements and other right-of-way agreements and
handles only claims related to those agreements
- a person hired to investigate claims-related insurance fraud but not to
adjust or evaluate claims
- an individual whose duties are limited to obtaining or providing claims
information and entering it into an automated system (FNOL)
- a nonresident adjuster who is
+ adjusting a single loss in Texas
+ adjusting catastrophe losses
+acting as a temporary substitute for a licensed Texas adjuster
- Types of Adjuster Licenses - -- Property, casualty, and surety.
- Workers compensation, employers liability, and USL&H (U.S. Longshore and
Harbor Workers Compensation Insurance)
- All lines (for adjusters who qualify to handle claims in the two foregoing
categories)
- Reporting Period - -*Usually a two-year period, is the period from the issue
date or last renewal date of the license to the expiration date of the license.
Licensed adjusters are required to complete 30 hours of CE by taking
certified courses within each reporting period.
Licensees may only count CE courses completed during the reporting period.
- Certified Course - -a classroom, classroom equivalent, or self-study course
offered by a registered provider and approved by the TDI.
- Emergency Adjusters License - -*to be issued when an emergency results
from a disaster such as an act of God, a riot or civil commotion, or a wildfire.
An adjuster must apply for an emergency license within five days after
beginning work as a CAT adjuster. To qualify for an emergency license, the
emergency adjuster's application must be certified by a licensed adjuster or
an insurer authorized to do business in Texas. Whoever certifies the
emergency adjuster's application is responsible for that person's claims
practices. The applicant need not be a Texas resident or an otherwise
licensed adjuster.
Solutions
Duties of the Department of Insurance - -The Texas Department of
Insurance (TDI) regulates the state's insurance industry. TDI is responsible
for enforcing insurance laws passed by the legislature and for developing
rules and regulations to aid in that enforcement.
TDI is responsible for:
-issuing certificates of authority to insurers wishing to market insurance
products in Texas (it is illegal for an insurer to transact insurance business in
Texas without a certificate of authority);
-overseeing the marketing practices and solvency of the insurers that are
authorized to do business in the state of Texas;
-establishing product standards, including required and prohibited provisions
in insurance contracts;
-licensing producers to sell insurance products;
-conducting investigations to determine whether there have been violations
of insurance law;
-making reasonable rules and regulations necessary to implement Texas
insurance laws;
-taking legal action to enforce the law, including issuing cease and desist
orders and imposing penalties on violators;
-administering the state's workers compensation system; and
-protecting consumers and ensuring fair competition in the insurance
industry.
- Commissioner as Department Chief - -TDI is headed by the Commissioner
of Insurance, who is the department's chief executive and administrative
officer. The Commissioner is appointed by the governor and serves a two-
year term.
- Powers and Duties of the Commissioner - -As the head of the state's
Insurance Department, the Commissioner is responsible for enforcing and
administering all laws pertaining to insurance in the state of Texas, as well
as other laws that grant jurisdiction to the TDI or apply to the TDI or to the
commissioner. The Commissioner derives authority from the Insurance Code
and other state insurance laws and from Title 5 of the Labor Code and other
Texas workers compensation laws.
- Insurer Impairment Prohibited - -Once an insurer is issued a license and
becomes admitted, different state regulations require it to maintain
minimum amounts of working capital on a going-forward basis.
TDI examines the financial condition of companies licensed in Texas and
requires insurers to maintain specified levels of surplus. TDI also publishes
company profiles that show a company´s complaint record and other useful
,information, including enforcement actions taken against the company and
company history.
- Insurer's Deposit with Comptroller - -An insurer may voluntarily deposit
funds with TDI as a condition to transacting business in Texas if it is required
to do so in its home state. TDI will hold these funds for the protection of the
insurer's policyholders and creditors. When the Commissioner is assured that
there is no longer a need to hold the deposited funds, they may be returned
to their owner.
- Insurer's Reserve Computed - -TDI will compute the reinsurance reserve
necessary for all risks that an authorized insurer is covering in the state.
- Reinsurance Reserve - -a fund providing for the return of unearned
premiums on policies that are canceled
- Unearned premium - -The portion of the policy premium that has not yet
been "earned" by the company because the policy still has some time to run
before expiration.
- Complaint - -*Any written communication to an insurer, not solicited by
the insurer, expressing a grievance relating to an unfair claims settlement
practice.
If a written complaint is filed with TDI, the department will notify each
complaining party of the status of the complaint at least once per quarter
unless giving the notification would jeopardize an undercover investigation.
The department will keep records of every complaint it receives.
- Electronic Transfers - -Among the Commissioner's duties is the
responsibility for handling any funds from penalties, fees, or other sources
held for the benefit of the state, including the duty to use electronic means
to transfer any funds over $500,000.
- Market Conduct Exam - -*An investigation by insurance regulators to
determine if an insurer has followed state laws relating to marketing,
advertising, sales, underwriting, rating, and claims handling practices.
-State regulation is not uniform. What is allowed in other states may not be
allowed in Texas
-The examination focuses on general business patterns or practices of an
insurer, not just specific errors.
- Code Enforcement - -The insurance code authorizes the TDI to address
reasonable inquiries to insurance companies or other authorized insurance
representatives concerning matters necessary to discharge the TDI's duties
,or other matters that the TDI considers necessary for the public good or for
the public good.
- Penalties - -The insurance commissioner may revoke or modify the
certificate of authority of any carrier that fails to meet the legal requirements
under which the certificate is granted. At least 10 days' advance notice of
this revocation or modification, the commissioner must notify the carrier of
its intentions and state a specific reason for the action.
Types of violations:
- Willfully violated a state insurance law
- Intentionally made a material misstatement on the license application
- Attempted to obtain, or actually obtained, a license by fraud or
misrepresentation
- Misappropriated, converted, or illegally withheld money belonging to an
insurer, an insured, or a claimant
- Engaged in other fraudulent or dishonest acts or practices
- Materially misrepresented the terms and conditions of an insurance policy
- Encouraged a policyholder to surrender or replace an existing policy by
inaccurately comparing its terms or conditions
- Been convicted of a felony
- Offered a rebate or kickback to an insured
- Sought or obtained an insurance license primarily for the purpose of
insuring himself, a member of his family, or a business associate rather than
insuring the general public.
- Continuing Education - -Many states that require licensing also require a
specified number of continuing education (CE) credits in order to renew the
license. CE is important for adjusters because new state laws and court
decisions frequently affect how claims are handled or who is covered under
various insurance policies.
- Adjuster - -In Texas, any person who adjusts insurance claims for an
insurance company. Anyone supervising claims handling is also considered
an adjuster. The adjuster may be an individual, operating as an independent
contractor, or an employee of any of the following:
adjustment bureau
association
insurance agent
independent contractor
insurance company
managing general agent (MGA)
- Not an Adjuster - -- an attorney
- an insurance company's salaried employee who does not regularly adjust,
investigate, or supervise insurance claims
, - any party, such as an attorney, engineer, photographer, or a private
detective, hired only to provide technical assistance to a licensed adjuster
- an insurance agent who processes undisputed or uncontested claims for
the insurer
- a clerical claims department or agency employee who does not negotiate
claims
- a person who handles, life, accident, and health claims (This exemption
does not apply to workers compensation claims)
- someone who handles easements and other right-of-way agreements and
handles only claims related to those agreements
- a person hired to investigate claims-related insurance fraud but not to
adjust or evaluate claims
- an individual whose duties are limited to obtaining or providing claims
information and entering it into an automated system (FNOL)
- a nonresident adjuster who is
+ adjusting a single loss in Texas
+ adjusting catastrophe losses
+acting as a temporary substitute for a licensed Texas adjuster
- Types of Adjuster Licenses - -- Property, casualty, and surety.
- Workers compensation, employers liability, and USL&H (U.S. Longshore and
Harbor Workers Compensation Insurance)
- All lines (for adjusters who qualify to handle claims in the two foregoing
categories)
- Reporting Period - -*Usually a two-year period, is the period from the issue
date or last renewal date of the license to the expiration date of the license.
Licensed adjusters are required to complete 30 hours of CE by taking
certified courses within each reporting period.
Licensees may only count CE courses completed during the reporting period.
- Certified Course - -a classroom, classroom equivalent, or self-study course
offered by a registered provider and approved by the TDI.
- Emergency Adjusters License - -*to be issued when an emergency results
from a disaster such as an act of God, a riot or civil commotion, or a wildfire.
An adjuster must apply for an emergency license within five days after
beginning work as a CAT adjuster. To qualify for an emergency license, the
emergency adjuster's application must be certified by a licensed adjuster or
an insurer authorized to do business in Texas. Whoever certifies the
emergency adjuster's application is responsible for that person's claims
practices. The applicant need not be a Texas resident or an otherwise
licensed adjuster.
