Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOMedium
An agent is found to have placed insurance coverage with an unauthorized insurer in Texas. What is the Texas Department of Insurance's (TDI) primary concern regarding such an action?
- AThe insured may not have a valid claim or adequate protection.
- BThe agent bypassed the standard licensing process for insurers.
- CThe agent may not receive a commission from an unauthorized insurer.
- DThe unauthorized insurer may not pay premium taxes to the state.
Show answer & explanationAnswer & explanation
Correct answer: A. The insured may not have a valid claim or adequate protection.
The primary concern of the TDI when an agent places coverage with an unauthorized insurer is consumer protection. Unauthorized insurers are not subject to state regulations, solvency oversight, or guaranty fund protections, meaning insureds are at significant risk of not having claims paid or adequate protection.
Why the other options are wrong
- B. While true, the consequence of bypassing the process is consumer harm, which is the primary concern.
- C. While possible, the agent's commission is not the TDI's primary concern.
- D. Premium taxes are a concern, but secondary to the direct harm to consumers.
Unauthorized Insurer
An insurance company that has not been granted a Certificate of Authority by the Texas Department of Insurance to conduct insurance business in the state.
- Policies issued may not be enforceable.
- No state guaranty fund protection for policyholders.
- Placing business with them is prohibited for licensed agents.
Memory trick: Unauthorized means UNPROTECTED for the policyholder.