TEXAS LICENSING EXAM QUESTIONS WITH
ACCURATE ANSWERS
Duties of the Department of Insurance - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers TDI will compute the reinsurance reserve
necessary for all risks that an authorized insurer is covering in the state.
Reinsurance Reserve - Accurate answers a fund providing for the return of unearned
premiums on policies that are canceled
Unearned premium - Accurate answers 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 - Accurate answers *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 - Accurate answers 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 - Accurate answers *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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers - 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 - Accurate answers - 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 - Accurate answers *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 - Accurate answers a classroom, classroom equivalent, or self-study
course offered by a registered provider and approved by the TDI.
Emergency Adjusters License - Accurate answers *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.
An emergency license fee, not to exceed $20, must be paid to the TDI within 30 days after the
license is issued. An emergency license is good for 90 days, but the Commissioner may extend it
for an additional 90 days.
License Reinstatement or Reissuance - Accurate answers An adjuster whose license has
been suspended, revoked, or nonrenewed may apply for reinstatement. Before restoring the
license, the Commissioner must determine that the reason why the license was suspended,
revoked, or nonrenewed no longer exists.
Criminal Penalty - Accurate answers Criminal penalties of up to $500 and/or six months in
the county jail may be imposed on an unlicensed person who acts as an adjuster or represents
ACCURATE ANSWERS
Duties of the Department of Insurance - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers TDI will compute the reinsurance reserve
necessary for all risks that an authorized insurer is covering in the state.
Reinsurance Reserve - Accurate answers a fund providing for the return of unearned
premiums on policies that are canceled
Unearned premium - Accurate answers 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 - Accurate answers *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 - Accurate answers 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 - Accurate answers *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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers 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 - Accurate answers - 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 - Accurate answers - 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 - Accurate answers *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 - Accurate answers a classroom, classroom equivalent, or self-study
course offered by a registered provider and approved by the TDI.
Emergency Adjusters License - Accurate answers *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.
An emergency license fee, not to exceed $20, must be paid to the TDI within 30 days after the
license is issued. An emergency license is good for 90 days, but the Commissioner may extend it
for an additional 90 days.
License Reinstatement or Reissuance - Accurate answers An adjuster whose license has
been suspended, revoked, or nonrenewed may apply for reinstatement. Before restoring the
license, the Commissioner must determine that the reason why the license was suspended,
revoked, or nonrenewed no longer exists.
Criminal Penalty - Accurate answers Criminal penalties of up to $500 and/or six months in
the county jail may be imposed on an unlicensed person who acts as an adjuster or represents
