Texas Statutes and Rules Common to All Lines

To legally transact insurance in this state, an insurer must obtain which of the following?

• Certificate of Authority

• Power of Attorney

• Business entity license

• Certificate of Insurance

Answer explanation

A Certificate of Authority is required in order to transact insurance.

When an individual obtains an insurance license for the primary purpose of writing insurance on him- or herself, or for members of his or her immediate family, or business, this is called

• Rebating.

• Self-insurance.

• Controlled business.

• Personal insurance.

Answer explanation

When producers sell policies on themselves, their family, or their coworkers, this is called "controlled business." In this state, at least 25% of a licensee's total volume of premiums in a calendar year must be from business other than controlled business.

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of

• Rebating.

• Misrepresentation.

• Concealment.

• Unfair claim practice.

Answer explanation

Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

All of the following are unfair claims settlement practices EXCEPT

• Suggesting negotiations in settling the claim.

• Refusing to pay claims without conducting a reasonable investigation.

• Failing to adopt and implement reasonable standards for settling claims.

• Failing to acknowledge pertinent communication pertaining to a claim.

Answer explanation

When settling claims, negotiation can come into play.

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

• Nonprofit service organization

• Stock

• Mutual

• Reciprocal

Answer explanation

Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?

• The judge will determine when the hearing will be held.

• The hearing date can be set for any time within the next year, unless both parties agree to a later date.

• The hearing must be set for exactly 30 days after the request is made.

• The hearing must be held within 30 days of receiving a request, unless both parties agree to a later date.

Answer explanation

The hearing must be held no later than the 30th day after the date the Commissioner receives the request for a hearing.

The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer’s investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?

• Delay an acceptance or rejection decision

  BReduce the claim amount

• Reduce the claim amount

• Disregard the claim

• Deny the claim immediately

Answer explanation

Insurers can delay an acceptance or rejection decision for 30 days if arson is suspected.

Which of the following is another term for an authorized insurer?

• Licensed

• Legal

• Admitted

• Certified

Answer explanation

Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

An insurance professional advises a client regarding the benefits of her life insurance policy, in exchange for a fee. Which of the following terms best describes this type of insurance professional?

• Counselor

• Agent

• Producer

• Advisor

Answer explanation

A life insurance counselor is someone who, for a fee or commission, offers to examine a life insurance, an annuity, or pure endowment policy and gives advice, recommendations or information regarding the policy’s terms, conditions, benefits, coverage or premium.

The requirement that agents not commingle insurance monies with their own funds is known as

• Accepted accounting principal.

• Fiduciary responsibility.

• Premium accountability.

• Express authority.

Answer explanation

Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.