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Texas statutes for life and health insurance.
Comprehensive overview of Texas life and health insurance statutes, licensing, regulations, and compliance requirements.
Key Takeaways
- Texas insurance agents must meet strict licensing and continuing education requirements to maintain their credentials.
- Unfair trade practices and violations of the Texas Insurance Code can lead to severe penalties including license revocation and fines.
- The Texas Commissioner of Insurance enforces laws, conducts audits, and regulates insurers but does not draft legislation.
- Insurance advertisements and illustrations must be truthful, clear, and not misleading to protect consumers.
- Federal laws such as the Fair Credit Reporting Act also impact insurance practices in Texas.
Summary
- Explains types of insurance licenses in Texas including agent, non-resident, counselor, temporary, and conditional licenses with their requirements and restrictions.
- Details license maintenance including renewal periods, continuing education requirements, fees, and exemptions.
- Describes grounds for license denial, suspension, and revocation including unfair trade practices like misrepresentation, fraud, and rebating.
- Outlines investigation procedures, hearings, penalties, and fines related to violations of Texas Insurance Code.
- Covers unfair claim settlement practices that insurers and agents must avoid.
- Describes the role and duties of the Texas Commissioner of Insurance including enforcement, audits, and issuing certificates of authority.
- Classifies insurance companies as domestic, foreign, or alien based on incorporation location.
- Summarizes relevant federal regulations such as the Fair Credit Reporting Act and telemarketing rules.
- Discusses marketing and solicitation rules for life insurance including advertisement standards and illustration requirements.
- Emphasizes compliance with ethical standards and legal obligations in Texas insurance industry.
Full Transcript — Download SRT & Markdown
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First, licensing types and requirements.
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An agent license, an agent is someone who directly solicits insurance to the general public.
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To get an agent license, you must be at least 18 years old, pass the exam in the last 12 months, and submit your application fees, fingerprints, and any other information that the Department of Insurance needs.
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Once you get your agent license, and if you would like to sell insurance across state lines in another state, you would have to get a non-resident license.
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A non-resident license allows you to sell insurance in other states, we have what are called reciprocal agreements with these other states that allows this to happen.
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You do not have to take the other state's exam, all you need to do is pay them some money and complete an application.
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A counselor's license.
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A counselor is someone who for a set fee or commission offers to examine a policy.
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They aren't actually selling the policy, they're only giving recommendations on the policy's terms and conditions.
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A temporary license.
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A temporary license is issued without having taken the written exam.
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With a temporary license, you could sell insurance for 90 days.
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Temporary licenses can only be issued once in any six-month period, that six-month period began whenever the license was first issued.
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Temporary licenses are not renewable.
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And temporary licenses cannot be used for what's called controlled business, and controlled business is sales made to family members or business associates.
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A conditional license.
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A conditional license could be issued by the commissioner without having to wait for the results of your criminal history check.
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If nothing's found in your background, the temporary license would become permanent.
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License maintenance and duration.
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Your license must be renewed every two years, you don't have to take the test again, all you need to do is pay the state the required fee, in Texas that's $50, and also complete your continuing education.
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In Texas, the continuing education requirement is 30 hours of CE every two years, at least two of those hours must cover ethics.
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All hours must be completed during the renewal period.
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Any excess hours cannot be carried over.
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At least 50% of your hours must be in a classroom or classroom equivalent, and all that means is online, and you must maintain your records for four years.
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Agents who have been licensed for 20 years are exempt from the CE requirements.
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And non-agent, non-resident agents are not subject to our CE requirements. If you do not renew your license prior to the renewal date, it can be renewed within 90 days and pay an extra fee.
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After 90 days but less than a year, you can renew it by completing a new application and paying an extra fee. However, after one year, you have to start all over and take the exam again.
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License denial, suspension, and revocation.
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If you like to lie, cheat or steal, you could have your license denied or revoked.
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If you violate the Texas Insurance Code, that's another reason to have your license denied or revoked.
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If you're a felon, that's another reason.
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Some unfair trade practices that could cause you to get your license suspended or revoked.
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Misrepresentations, that would be the lies you would go out and tell.
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Defamation, defamation is written or oral intended to injure a person engaged in the business of insurance.
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Like defamation of character.
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Boycotting, coercion and intimidation.
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Fraud.
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And rebating.
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Rebating is offering anything in exchange for a sale.
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You cannot offer to um rebate premiums back to an insurer for buying a policy.
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You can't offer them a gift in exchange for buying a policy.
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Rebating is illegal in any form.
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If your license gets denied or revoked, you cannot reapply for five years.
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Investigations, hearings and penalties.
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You may get a cease and desist order that was issued by the commissioner.
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If you participate in any of the unfair trade practices we talked about or for violating the insurance code.
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If you get a cease and desist order, you have 30 days to contest it.
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If you contest it, they must set a hearing within 10 days.
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If you violate a cease and desist order, it is a $1,000 fine per violation up to $5,000.
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And then the maximum fine for violating the Texas Insurance Code is $25,000.
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Unfair claim settlement practices.
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These are some things that insurers and even agents should strive not to do when it comes to settling claims.
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For instance, misrepresenting policy facts or provisions.
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Failing to act promptly on claim communications.
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Failing to adopt reasonable standards for prompt investigations.
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Refusing to pay claims without proper investigation.
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Or delaying claims solely because there is other insurance in force.
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The Commissioner of Insurance.
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In Texas, the Commissioner of Insurance is placed into office by the governor.
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For a two-year term, ending February 1st of every odd year.
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The main duties of the commissioner are to enforce the insurance code.
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Conduct audits and investigations.
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The one thing the commissioner does not do is the commissioner does not draft insurance laws.
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That is done by the Senate.
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The commissioner just interprets the laws as they are written.
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The Commissioner of Insurance must examine the affairs of every insurer at least once every five years.
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He can do it as often as he wants.
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But he has to do it at least once every five years.
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If it were an HMO, he must examine the affairs of every HMO at least once every three years.
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The commissioner issues certificates of authority to insurers.
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A certificate of authority is a special license that insurance companies have to have to do business in a state.
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If an insurance company is issued a certificate of authority, that makes them authorized or admitted to do business in the state.
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If they do not have a certificate of authority or have been denied a certificate of authority.
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They are unauthorized or non-admitted.
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Now, insurance companies are classified by their location of incorporation.
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For instance, if they are incorporated in Texas and doing business here.
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They are a domestic insurer.
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If they are incorporated in another state but doing business here.
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They are a foreign insurer.
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And then if they are incorporated in another country but doing business here.
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They are an alien insurer.
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Federal regulations.
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We have the Fair Credit Reporting Act.
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The Fair Credit Reporting Act regulates consumer reports.
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Reporting agencies must make reports available to consumers.
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The maximum fine for violating the Fair Credit Reporting Act is $2,500.
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Telemarketing rules.
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Telemarketing calls can only be made between the hours of 8:00 a.m. and 9:00 p.m.
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Calls must identify the seller, the purpose of the call, the nature of the goods or services being offered.
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And then telemarketing companies call records must be kept for a minimum period of 24 months.
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Texas statutes for life insurance.
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Marketing and solicitation of life insurance.
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Advertisements.
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Insurers must maintain control over the content and dissemination of all advertisements.
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Advertisements are the responsibility of the insurer.
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Advertisements must not make incomplete or unfair comparisons with other policies, rates, benefits or dividends.
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They must use a language that can be easily understood by the general public.
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They must identify the actual insurer before using any trade names.
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They may not contain false statements regarding claim payments.
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Implying that claim payments may be liberal or generous or special treatment will be provided beyond policy terms.
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And they must not misstate past dividend history or imply dividends are guaranteed in the policy.
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Because dividends are not guaranteed in policies.
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Illustrations and solicitations used in life insurance.
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An illustration must be specific to the person that is being illustrated for.
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It cannot be a generic illustration.
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Illustrations cannot represent the policy as anything other than life insurance.
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Illustrations cannot describe non-guaranteed elements in a manner that could be misleading.
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Agents cannot provide incomplete illustrations.
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Illustrations cannot use the term vanish or vanishing premium, implying that a policy becomes paid up.
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A policy summary.
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Summarizes a policy being presented to a client.
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That policy summary may be in the form of a brochure or just a handout.
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A buyer's guide is given to prospective insureds at the time of application.
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A buyer's guide is a generic, generic piece of information.
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Explains how a buyer should go about buying the amount and type of insurance.
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The Life Accident Health Hospital Service Guarantee Association.
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Protects the interest of policyholders when insurers become insolvent.
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Life insurance policy provisions.
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Payment of claims provision for life insurance.
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Death claims must be paid within two months.
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Free look period.
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The free look period is 10 days for life insurance policies.
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There's a 30-day grace period for individual life insurance policies.
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Viatical settlements.
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Viatical settlements are third-party contracts.
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They are not part of life insurance policies.
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A viatical settlement allows an insured to meet with a third party and do an absolute assignment of their policy over to that third party.
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The original insured is called the viator in a viatical settlement.
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The viator receives a percentage of the face amount of the policy.
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The new owner will maintain premium payments and eventually will collect the entire death benefit.
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Non-forfeiture law.
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Cash value in a permanent policy is called the non-forfeiture value.
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There are three non-forfeiture options.
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There is a cash surrender value.
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Where you would surrender the policy and they send you a check for the cash value.
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Reduced paid-up insurance provides the longest period of protection in your non-forfeiture options.
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Extended term insurance provides the highest amount of protection of your non-forfeiture options.
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Replacement of life insurance.
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A notice regarding replacement must be signed by both the producer and the insured at the time of a policy replacement.
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A replacement occurs whenever someone is going to quit paying on one policy and start paying on another.
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So if a policy lapsed, forfeited, surrendered or otherwise terminated.
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Or if a policy is being converted to reduced paid-up insurance or extended term, that is also considered a replacement.
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Twisting.
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The term twisting means that an agent is trying to replace a policy to the detriment of their client by lying about the benefits of your policy so they will cancel theirs.
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Group life insurance.
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The employer is the master policyholder in group life.
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Employees get certificates of insurance.
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Group life has a 31-day grace period to it.
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The misstatement of age provision in group life allows for the adjustment of benefits and premiums.
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And group life does have a conversion privilege to it.
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So that terminated employees can convert their group life insurance to a whole life policy without proof of insurability within 31 days of termination.
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It must be a permanent policy that they convert to.
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They cannot convert to term insurance.
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And credit life insurance.
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Credit life insurance coverage written on the life of a debtor to a creditor.
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The creditor is the owner and the beneficiary.
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The debtor pays the premiums.
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Credit life is written as decreasing term insurance, the death benefit decreases every time you make a payment.
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The creditor cannot require the debtor to purchase the policy from a specific insurer.
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That would be coercion and that is not allowed.
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Texas statutes for accident and health insurance.
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Advertisements.
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Once again, advertisements are the responsibility of the insurer.
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They must maintain control over the content and dissemination.
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Required provisions in accident and health insurance.
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Entire contract provision.
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Entire contract provision states only the application, the policy, any riders that have been added, or if the policy has been amended in any way can make up the contract.
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Time limit on certain defenses.
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This is your incontestable provision for health insurance.
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It is two years for most things that the period of incontestability applies to.
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However, fraudulent misstatements can be contested as long as a health policy is in force.
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Grace period.
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Depends on the mode of premium payment.
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Weekly, seven days, monthly, 10 days, all other modes, 31.
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Reinstatement provision.
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Once a policy does lapse.
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A policy could be reinstated by paying any back premiums and proving insurability.
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Accidents would be covered immediately.
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However, an illness is only covered after 10 days of reinstatement.
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This helps prevent adverse selection.
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Notice of claim provision.
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20 days.
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Claim forms provision.
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15 days.
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Proof of loss.
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90 days.
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Time of payment of claims provision.
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This is the when.
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When are claim payments to be made?
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They're to be made immediately upon written proof of loss, usually within 60 days.
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However, disability claims must be paid at least monthly.
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Payment of claims provision.
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This is the who.
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To whom are claim payments to be made?
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Well, the insured is first.
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If they are dead, then their beneficiary.
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If there's no beneficiary, then the estate, unless otherwise assigned to a doctor or hospital.
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Physical exam and autopsy provision.
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The insurer can have the insured examined as many times as they want while the claim is pending.
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However, it is at the insurer's own expense.
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Legal action for our accident and health insurance.
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If you want to bring legal action against a health insurer, you must wait 60 days but no later than three years after proof of loss.
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Change of beneficiary.
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The owner can change beneficiaries unless the beneficiary is set up as irrevocable, then they have to have their written permission before they can make any changes to a policy.
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Free look period.
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10 days unless it is a Medicare supplement or long-term care policy, then you have a 30-day free look period.
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The other thing about Medicare supplement and long-term you need to know, they are guaranteed renewable.
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Dependent child age limit is up to age 26 now because of the Affordable Care Act.
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Newborns.
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Newborns are covered from the moment of birth and notification must be given to the insurer within 31 days and pay the appropriate fees.
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The definition of small employer in Texas is two to 50 employees.
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Medicare supplements.
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Must have a 30-day free look period and must be guaranteed renewable.
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There are Medicare supplements plans A through N.
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Plan A contains all the core or basic benefits.
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All of those core or basic benefits must be found in all of the other plans.
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The one thing that plan A does not cover is the part A deductible of Medicare.
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Medicare supplements are sold by private insurers.
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If insurance companies are going to market Medicare supplements, they don't have to market all of the plans, but they must at least sell plan A.
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Medicare supplements are guaranteed issue.
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As long as the senior's enrolled in part B of Medicare, that triggers a six-month open enrollment period.
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Where the supplement must be a guaranteed issue.
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If they are not enrolled in part B of Medicare, they could be declined if they have health problems.
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Medicare supplements can put a six-month pre-existing limitation on any pre-existing conditions.
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However, after a supplement has been in force for six months, all pre-existing conditions must be covered.
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Twisting.
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This is an illegal business practice.
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If you are trying to convince an applicant to cancel their current coverage and take yours by misrepresenting the benefits.
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Long-term care coverage.
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Long-term care policies must be at least guaranteed renewable.
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And they must have a 30-day free look period.
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And also long-term care policies must have a 12-month benefit period to them.
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And then lastly, we have the Texas Health Insurance Risk Pool.
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If the insured can't get coverage anywhere else because of their health issues.
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They may be eligible for the risk pool.
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The risk pool has a stop loss limit set at $3,000.
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That's it for your statutes.
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Good luck on your test.
Topics:Texas insurance statuteslife and health insuranceinsurance licensing TexasTexas Department of Insuranceinsurance license renewalinsurance regulation Texasinsurance advertising rulesTexas insurance commissionerinsurance unfair trade practicesFair Credit Reporting Act
