Texas Licensing Exam Questions and
Answers
Duties of the Department of Insurance - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-TDI will compute the reinsurance reserve necessary
for all risks that an authorized insurer is covering in the state.
Reinsurance Reserve - ANS-a fund providing for the return of unearned premiums on
policies that are canceled
Unearned premium - ANS-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 - ANS-*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 - ANS-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 - ANS-*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 - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-- 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 - ANS-- 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 - ANS-*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 - ANS-a classroom, classroom equivalent, or self-study course offered
by a registered provider and approved by the TDI.
Emergency Adjusters License - ANS-*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 - ANS-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.
Answers
Duties of the Department of Insurance - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-TDI will compute the reinsurance reserve necessary
for all risks that an authorized insurer is covering in the state.
Reinsurance Reserve - ANS-a fund providing for the return of unearned premiums on
policies that are canceled
Unearned premium - ANS-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 - ANS-*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 - ANS-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 - ANS-*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 - ANS-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 - ANS-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 - ANS-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 - ANS-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 - ANS-- 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 - ANS-- 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 - ANS-*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 - ANS-a classroom, classroom equivalent, or self-study course offered
by a registered provider and approved by the TDI.
Emergency Adjusters License - ANS-*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 - ANS-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.
