Texas Licensing Exam 818 100% Answered Questions

Duties of the Department of Insurance - ANSWER-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 - ANSWER-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 - ANSWER-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 - ANSWER-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 - ANSWER-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 - ANSWER-TDI will compute the reinsurance reserve necessary for all risks that an authorized insurer is covering in the state. Reinsurance Reserve - ANSWER-a fund providing for the return of unearned premiums on policies that are canceled Unearned premium - ANSWER-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 - ANSWER-*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 - ANSWER-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 - ANSWER-*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 - ANSWER-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 - ANSWER-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 - ANSWER-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 - ANSWER-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 - ANSWER-- 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 - ANSWER-- 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 - ANSWER-*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 - ANSWER-a classroom, classroom equivalent, or self-study course offered by a registered provider and approved by the TDI. Emergency Adjusters License - ANSWER-*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 - ANSWER-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 - ANSWER-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 that he or she is an adjuster. An adjuster who adjusts claims of a type for which the adjuster is not licensed is subject to the same sanctions. Unfair Claims Practices Laws - ANSWER-All states have unfair claims practices laws that describe certain prohibited types of claims handling behavior. Because these laws describe undesirable behavior, a claim adjuster may generally infer that the behaviors opposite to these described as unfair are considered desirable. In any case, claims ethics begins with avoiding unfair claims practices. Texas unfair settlement claims practices law, like the law in other states, is patterned after the National Association of Insurance Commissioners (NAIC) Unfair Claims Settlement Practices Act and the NAIC's Unfair Property/Casualty Claims Settlement Practices Model Regulation. However, no two states' unfair claims settlement practices acts and regulations read exactly the same. Unfair Claims Settlement Practices Act - ANSWER-The unfair practices can be grouped into three major categories: 1. failure to respond to a claim promptly or failing to respond at all 2. misrepresenting the terms of the policy so as to deny liability when in fact the policy calls for payment of the claim 3. stalling or unreasonably denying claims so regularly that the insurer is a frequent subject of complaints or lawsuits. Unfair Claims Settlement Practices Act Cont'd. - ANSWER-The unfair claims settlement practices act applies to virtually all types of insurers, including not only stock and mutual insurance companies but also insurers operated as a proprietorship, partnership, or unincorporated association. Companies include: - life, health, or accident insurance company - fire or casualty insurance company; - hail or storm insurance company; - title insurance company - mortgage guarantee company; - mutual assessment company; - local mutual aid association; - local mutual burial association; - statewide mutual assessment company; - stipulated premium company; - fraternal benefit society; - group hospital service corporation; - county mutual insurance company; - Lloyd's plan; - reciprocal or interinsurance exchange; and - farm mutual insurance company. Claim - ANSWER-A written request or demand a Texas resident files with an insurer for payment of funds or the providing of services under the terms of a policy, certificate, or binder of insurance. Prohibited Practices - ANSWER-Any of the following acts by an insurer constitutes an unfair claim settlement practice: - knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to the coverage at issue; - not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear; - 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 that policyholder; - compelling a policyholder to let the insurer examine his or her federal income tax records as a condition for settling a claim; - unreasonably refusing or delaying an offer of settlement under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible in law for damages suffered; - attempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to an advertisement; - undertaking to enforce a full and final release from a policyholder when, in fact, only a partial payment has been made; - failing to establish proper controls to make certain that agents deliver funds due under policy provisions relative to cancelation of coverage within a reasonable time after such coverages are terminated; - refusing to pay claims without conducting a reasonable investigation based upon all available information - failing to maintain a record of complaints; and - Failing to promptly +Provide claim forms +Settle claims that with clear liability under one portion of the policy to influence settlement under a different portion. +provide PH with explanation of denial + Respond to request for personal contact by claimant +Affirm or deny a claim in a reasonable time frame +Acknowledgment of a claim within 15 days it is an unfair practice to require a claimant, as a condition of settling a claim, to produce the claimant's federal income tax returns for examination or investigation by the insurer unless a court orders the claimant to produce those tax returns, the claim involves a fire loss, or the claim involves a loss of profits or income. Complaint Record - ANSWER-Insurers must maintain a complete record of all complaints received during the preceding three years or since the date of the insurer's last examination by TDI, whichever period is shorter. The record must indicate: - the total number of complaints - the classification of complaints by line of insurance - the nature of each complaint - the disposition of the complaints - the time spent processing each complaint