Licensing Exam

Agent

Representative of Insurance Company; anyone licensed by the state to engage in insurance

What agents can do

• Sell/service/deliver policies

• Takes premium payments on behalf of/transfers money to insurance company

• Examining/inspecting risk

• Evaluating/settling insurance claims (adjusters)

• Can be fined up to $1,000 if doing w/o license

Brokers

Representatives of policyholders

Producer qualifications

• At least 18

• TX resident

• Pass exam

Adjuster

Someone who applies the policy coverages, limits, exclusions, and conditions to damages, circumstances, and the law

Adjuster Duties

• Evaluate and settle claims

• Investigate coverage and liability

• Contact all involved parties

• Make liability decisions

• Issue payment for damages

How often do adjusters need to complete continuing education

Every 2 years

How many hours of continuing education do adjusters need to complete?

24 hours

What is the grace period and late fee for license renewal?

90 days and $25h

Requirements if license is not renewed on time but has been expired for less than a year

$50 application fee, $25 late fee, redo fingerprints, complete continuing education, up to $500 fine

Requirements if license has been expired over 1 year

License must be fully retested for as well as a $50 application fee, $25 late fee, redo fingerprints, complete continuing education, and up to a $500 fine

Continuing education requirements

• 24 credit hours every 2 years

• 3 must be ethics hours

• At least 12 hours must be in a classroom setting

How long must records of continuing education be kept?

4 years

What is the penalty for not keeping continued education records for 4 years?

$50 per credit hour

Can CE credits be carried over?

No

How many times can a course be taken for credit during each renewal period?

Once

Twisting

Making misleading comparisons to get an insured to switch policies

Rebating

Promising something of value if a policy is purchased

How long must an applicant wait to reapply if their license is suspended?

1 year

How long must an applicant wait to reapply if their license is revoked?

5 years

How much can an agent be fined if they are practicing without a license?

$1,000

What are the four aspects of a contract?

• C- consideration

• L- legal purpose

• A- agreement

• P- competent parties

Consideration

Both parties agree to some financial responsibility

Legal purpose

Whatever is being insured must be legal

Agreement

Two aspects: offer and acceptance. The client applies for insurance and the insurer assigns a policy

Competent Parties

All parties must be of legal age and sound mind

Cease and desist

Issued if companies are found guilty pf acts prohibited by insurance code

Fined $1,000 per violation with a maximum of $5,000 in total

How much can companies be fined if they are found to be operating without a license?

Up to $10,000 per violation per day

Who is the Commissioner of Insurance appointed by?

The Governor

How long does the Commissioner maintain complaint files?

3 years

How often are newly established insurance companies examined?

Once a year for three years?

How often are existing companies examined?

Once every five years

What can be filed under an unfair claims settlement?

• Knowingly misrepresenting policy provisions

• Failing to promptly acknowledge claims and related communications

• Failing to adopt standards for prompt investigation of claims

• Not attempting, in good faith, to make prompt, fair, and equitable settlements where liability is reasonably clear

• Failing to maintain a record of all claims and complaints for 3 years

• Failing to assure that agents make cancellation refunds

• Not attempting deductible recovery

Fair Credit Reporting Act

• Protects consumer privacy

• Credit reports can only be ordered for underwriting insurance

• Insurer obligations

Insurer Obligations under the Fair Credit Reporting Act

• Insurer is not responsible for correcting inaccuracies

• Not required to notify applicant that credit report has been run unless it effects their company placement

Misrepresentation

Untrue statement concerning advertising, dividends, financial conditions or terms of a policy De

Defamation

Statement that is false or malicious, or of a derogatory nature used to damage another insurer

If an agent knowingly violates laws against unfair/deceptive trade practices, what happens to the damages awarded to the consumer?

They will be tripled

Risk Management

Managing risks rather than just paying premiums

Risk

Chance/uncertainty of loss

Pure Risk

A chance taken with no chance of financial gain

Speculative Risk

A chance taken that may result in loss, but may result in financial gain

Hazard

Increases chance of loss or increases the frequency or severity of loss

Types of hazards

Physical, moral, morale

Peril

The event that causes a loss

Loss

The reduction of the value of an asset, and the financial consequence of that reduction

Direct Loss

A reduction/decrease of value incurred as a direct result of a peril

When we need to pay to repair or replace the property

Indirect Loss

Any loss that is a financial consequence of the direct loss

Indemnity

Bringing insured back to the same financial condition they were in prior to the loss

Warranties

Absolute rules must exist and continue to exist throughout the policy term

If this is breached, it can void the contract

What is another name for indirect loss?

Consequential loss

ACV Formula

Replacement cost - depreciation

Waiver

Giving up/surrendering a known right

Estoppel

Unable to get the right back once you have waived it

Number of days an adjuster has to acknowledge a claim

15 days

Number of days an adjuster has to settle a claim if no fraud

30 days

Number of days an adjuster has to settle a claim if fraud present

45 days

Three standard questions for adjusting losses

Is the policy in force (active)?

Is the vehicle on the policy?

Is the driver on the policy?

Betterment

An improvement that enhances the value of the property more than replacement

Insurable Interest

The insured must have financial interest (ownership) in the subject of the insurance

Property Insurance

• 1st party

• Covers the insured’s property

• Always subject to a deductible

• Includes: collision and comprehensive coverages on the auto policy

• Real and personal

Real Property

Land, buildings, and other property attached to it

Personal Property

Contents of a dwelling, or an auto

Casualty/Liability Insurance

• 3rd party

• Pay for any damage or injury the insured causes to another person (the claimant)

• Never subject to a deductible

• Never for the insured

• Includes: bodily injury and property damage

Bodily Injury

Covers injuries, medical and funeral expenses, and pain and suffering

Property Damage

Covers expenses for damage caused to a claimant’s property

Personal Injury

Libel, slander, false arrest/detention, malicious prosecution, wrongful eviction, wrongful entry, publication violation privacy

Advertising Injury

Oral or written publication causing libel, slander, publication violating privacy, misappropriation of ideas, and copyright or trademark infringement

Four Components of Negligence

• Legal Duty

• Breach of Duty

• Actual Damages

• Proximate Cause

Legal Duty

The existence of a legal duty to act or standard of care

Breach of Duty

Failure to perform legal duty

Actual Damages

Damages and/or injuries occur to a third party

Proximate Cause

There is a cause-and-effect relationship between the negligent act and damages

Damages

What is paid for the reduction in value of an asset (loss)

Compensatory Damages

A combination of special and general damages designed to compensate an individual

Special Damages

Itemized losses (medical bills, lost earnings, property damage)

Punitive Damages

Designed to punish someone for gross negligence

Liability Limits

Chosen by the insured and represent the amount the insurance company will pay for loss

Split Limit

The limit of liability coverage is split into two coverages (bodily injury and property damage), then further split into a per person and per occurrence allotment

Combined Single Limit

The limit of liability is shown as one, combined limit that can be paid as needed for bodily injury and property damage

Aggregate Limit

The maximum amount of liability coverage a policy will pay over the entire policy period (1 year)

Split Limit

• Bodily Injury per person

• Bodily Injury per occurrence

• Property Damage

• 30/60/25

Per person

Maximum limits that would be paid for for bodily injury incurred by each person in an accident

Per occurrence

Maximum limits that would be paid in damages for either bodily injury or property damage arising out of a single occurrence or accident

Difference between an accident and occurrence

The duration of an event; the first one happens suddenly and the latter can happen over a period of time

Combined single limits

A single limit applies to both bodily injury and property damage arising from a single accident

Extended Coverage Perils

REV CH SHAW

Riots

Explosions

Vehicle

Civil Commotion

Hail

Smoke

Hurricane

Airplane

Windstorm

Wind driven rain exclusion

There must be a hole in the building (roof or window) before the insurance company will cover rain damage

Named or specified peril

Policy will list the perils that the company will protect the property against; insured has the burden of proof to show that the loss was a result of a covered cause of loss

Open or all risk peril

Policy covers the insured property against all causes of loss, unless the cause of loss is specifically excluded; insurer has the burden of proof to show that the loss was a result of an excluded cause of loss

Actual Cash Value

Today’s Replacement Cost - Depreciation

Basic concept is to pay the insured what the property is worth after subtracting the amount of use already expended from the property

Replacement Cost

Provides for coverage based on full replacement cost without a deduction for depreciation

Functional Replacement Cost

Occurs when the property becomes obsolete due to its design or b/c of technological advances; replaces property with closest equivalent

Market Value

Amount a willing buyer would pay a wiling seller for the property

Agreed Value

When the amount of insurance scheduled on the covered property is agreed to be the value and will be paid in the event of loss with no consideration given to market value, replacement cost, or depreciation

Deductible

The initial amount of damage a policyholder is responsible for

Restoration/Non-Reduction Limits

If there is a fire loss or other covered loss, the policy will respond, and the policy limit will be reduced by the amount of loss. The policy limits will then automatically be increased as repairs are made

Salvage

The insurance company can take title to damaged property after payment of a total loss

No Benefit to Bailee

When an insured’s property is damaged while in custody of someone else, this clause prevents the other party from benefiting from the insurance and preserves the insurer’s right to subrogate against the other party if they are responsible for the damage

Contribution by Limits

The policies will share the loss based on the ratio of each policy’s limit to the total available limits; also referred to as pro-rata