License Requirements, Renewal, and Enforcement
Texas decides who may hold an agent license, how a lapsed license comes back, and what happens when an agent or insurer breaks the rules.
Qualifying for a resident license
A resident applicant must be a resident of Texas before submitting an application. Texas requires an individual applicant for an agent license to be at least 18 years of age and to have passed the licensing examination within the past 12 months (TIC 4001.105).
A Texas licensing examination is reported on a scale of 0 to 100 with a passing score of 70, which is not the number or percentage of questions answered correctly, and a candidate who fails may schedule a new exam within one day, with no limit on the number of attempts (Pearson VUE, Texas Insurance Licensing Candidate Handbook). Some applicants need no examination, among them a person renewing an unexpired license and a person whose license expired less than one year earlier and was not denied, revoked or suspended (TIC 4002.003(a)).
A temporary license may not be issued to a person who does not intend to apply for a license to sell insurance to the general public (TIC 4001.156(b)). When a property and casualty agent dies, becomes disabled or is found insolvent, TDI may issue an emergency license, valid for 90 days in any 12 consecutive months and renewable for another 90 days in that period (TIC 4051.054). A Texas nonresident license is automatically suspended, canceled or revoked if the home state suspends, cancels or revokes the corresponding resident license (TIC 4056.052). Taking an application, collecting a premium, delivering a policy, and soliciting or negotiating insurance are all acts that constitute the business of insurance in Texas (TIC 101.051), and to “solicit” or “negotiate” insurance implies that the person is licensed.
Renewing a license late
| Time since the license expired | What the agent does (TIC 4003.007) |
|---|---|
| 90 days or less | May renew it by paying the renewal fee plus an additional fee equal to one-half of it |
| More than 90 days, less than one year | Cannot renew it, but may obtain a new license without the examination by filing a new application and paying the license fee plus one-half of it |
| One year or more | Must qualify for a new license, including reexamination if the license requires an examination |
A suspended or revoked license may not be renewed (TIC 4003.004(b)).
A Texas license holder on active military duty is entitled to two years of additional time to complete continuing education and any other requirement for renewing the license, and is exempt from any increased fee or other penalty for renewing late because of military service (Occ. Code 55.002, 55.003).
Insurer authority and surplus
To receive a certificate of authority, the company applies to the Commissioner and files its charter or articles of incorporation, financial statements showing that it meets the state’s capital and surplus requirements, and the other documents and fees the state requires. A company organized in another state or country also files its bylaws and the name and residence of each officer and director (TIC 982.104).
The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required. In Texas, when an insurer’s surplus is impaired beyond the statutory level, the Commissioner must order it to bring the surplus to an acceptable level or to cease engaging in business in Texas (TIC 404.053).
TDI examines each carrier as often as it considers necessary, and at least once every five years (TIC 401.052). The Commissioner may extend the 60-day approval period for a property and casualty form by up to 10 days (TIC 2301.006).
A policy provision that conflicts with state law does not make the policy invalid: the policy is read as amended to conform to the law.
How the Commissioner enforces the law
The statute sets no limit on the number of two-year terms a Commissioner may serve (TIC 31.022). The Commissioner may audit the books and records of any resident producer as frequently as necessary, and when the Commissioner believes a fraudulent insurance act has occurred, shall take disciplinary action and shall report it to an authorized governmental agency, meaning a law enforcement agency or a prosecuting attorney (TIC 701.001(1), 701.103(a)).
The recipient of a cease and desist order has not had their license suspended or revoked, but is required to stop or limit the activity addressed in the order. The Commissioner may also issue an emergency cease and desist order without a hearing for fraudulent, hazardous or immediately harmful conduct, requiring the person to stop immediately, with a hearing if the person requests one within 60 days (TIC 83.051–.053). The emergency order stays in effect while a hearing is pending unless the Commissioner stays it (TIC 83.055).
A person facing action by the Commissioner is entitled to notice and an opportunity for a hearing, and may ask a court to review the final order. Unfair practice charges come with a notice of hearing, and the hearing may not be held before the sixth day after the notice is served (TIC 541.102). A license holder facing denial, suspension or revocation is entitled to a hearing before the State Office of Administrative Hearings on at least 10 days’ notice (TIC 4005.104(a); Gov’t Code 2001.051). A person notified of a recommended administrative penalty has 20 days after receiving the notice to accept it or to request a hearing in writing (TIC 84.042(a)).
Grounds for denying or disciplining a license
The Department may deny an application or discipline a license holder who (TIC 4005.101(b)):
- Wilfully violated an insurance law of Texas
- Intentionally made a material misstatement in the application, or sought a license by fraud or misrepresentation
- Misappropriated, converted or illegally withheld money belonging to an insurer, an HMO, or an insured, enrollee or beneficiary
- Engaged in fraudulent or dishonest acts or practices
- Materially misrepresented the terms of a policy, or misrepresented or incompletely compared contract terms to get a contract surrendered or lapsed so it could be replaced
- Was convicted of a felony
- Offered or gave a rebate of an insurance premium or commission to an insured or enrollee
- Is not actively writing insurance for the public generally, or got the license mainly to insure themselves, family members or business associates
Forging another person’s name on an insurance application and cheating on a licensing examination are examples of fraudulent or dishonest acts. A conviction can also support suspending or revoking a license when the offense directly relates to the duties and responsibilities of the licensed occupation (Occ. Code 53.021(a)). The Department may also place a suspended agent on probation, assess a penalty or reprimand the license holder (TIC 4005.102). A person whose application was denied or whose license was revoked may not apply for an agent license before the fifth anniversary of that action, or of a final court order affirming it (TIC 4005.105(b)). That bar does not apply to a denial or revocation for failing the examination, missing continuing education or its fine, or an incomplete application (TIC 4005.105(d)).
Other prohibited practices
- Claiming a license you don’t hold. An insurance producer who represents to the public that they are licensed to conduct insurance business in Texas, but has not passed the appropriate licensing examination, is in violation of regulation. A producer found guilty of conducting business in any line for which they are not properly licensed may have any other insurance license suspended or revoked.
- False financial statements. Filing with a public official, or making or circulating, a false statement of an insurer’s financial condition with intent to deceive is an unfair practice (TIC 541.055(a)). A misleading representation about an insurer’s financial condition is also an unfair practice in its own right, whatever its purpose (TIC 541.051(3)(A)).
- Advertising. An untrue, deceptive or misleading statement about the business of insurance is an unfair trade practice in any medium. Advertising may not state or imply that policies are approved, or that a company’s financial condition is endorsed, by any government agency or independent group unless that is the fact, or make false statements about how quickly claims are paid.
- Claims. In Texas, any of the acts listed in its claim settlement statute, committed by an insurer, is an unfair claim settlement practice (TIC 542.003(b)). So is refusing to pay a claim without conducting a reasonable investigation (TIC 541.060(a)). Under the NAIC’s model act, so is settling on an application altered without the insured’s consent.
- Rates for widowed people. A widowed person may never be charged a different rate than a married person (TIC 544.002(d)).