Life and Health Insurance Key Words

Alien insurer – An insurance company incorporated or organized under the laws of any jurisdiction outside of the United States.

Appointment – The act of an insurance company authorizing a producer to transact insurance on their behalf.
Assumed names – An insurance producer doing business under any name other than the producer's legal name shall notify the Commissioner before using the assumed name.

Authorized (admitted) insurer – An insurance company that has been issued a certificate of authority by the Commissioner, authorizing the company to transact insurance business in this state.

Cease-and-desist order – The Commissioner may issue a cease-and-desist order to any person found to have committed an unfair or deceptive act or violated a state insurance law.

Certificate of authority – A license granted by the Commissioner to an insurance company authorizing them to transact insurance in this state.

Commingling – A producer who has combined premiums collected with personal funds has engaged in commingling.

Commission – The amount paid by an insurer to a producer for transacting insurance.

Continuing education – Continuing education is biannual education required for a producer to maintain their insurance license.

Controlled business – Policies written on people that the licensed agent has direct influence over, including family, employers/employees, and/or any company to which the agent has stock control.

Defamation – This is an unfair practice where a producer or insurer makes false and maliciously critical statements regarding the financial condition of a competing insurer.

Direct response – Direct response solicitation means any offer by an insurance company to persons in this state (either directly or through a third party) to effect life or health insurance coverage that enables the individual to apply for the insurance on the basis of the offer.

Domestic insurer – An insurance company incorporated or organized under the laws of this state.

Fair Credit Reporting Act – The Fair Credit Reporting Act (FCRA) is a federal law that regulates the use and disclosure of consumer credit information.

Fiduciary responsibility – Producers possess this responsibility since they handle the monies of the public. A producer must account for all premiums collected, or they have failed to uphold this duty. Anyone who possesses this duty must act with a high degree of trust.

Foreign insurer – An insurance company incorporated or organized under the laws of the United States or any jurisdiction within the United States.

Fraternal benefit society – Fraternal benefit societies are a corporation, society, or order that have a representative form of government and are organized through a lodge system. Fraternal benefit societies solicit insurance only among members and exist for the benefit of members and their beneficiaries.

Fraud – Fraud is the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party. Fraud is grounds for voiding an insurance contract.

Fraud and false statements – The fraud and false statements federal law makes it illegal to lie, falsify, or conceal information (orally or in writing) from a federal official.

Guaranty association – The Insurance Guaranty Association or Fund protects policy owners against the insolvency of an insurer by providing a mechanism for the payment of covered claims under certain insurance policies and surety bonds.

Insurance agent – An individual who in any manner sells, solicits, or negotiates insurance on behalf of insurance companies for compensation.

Insurance broker – An insurance broker in Texas is a representative of the insured.

Insurance Commissioner – The Commissioner is the chief officer of the state’s Insurance Department.

Insurance counselor – A life and health insurance counselor is any person who, for a fee or commission, offers insurance advice. This can also include someone who has completed a recognized insurance course and is designated as a certified financial planner, chartered life underwriter (CLU), chartered financial consultant, or general insurance agent.

Insurance producer – A producer is any person who sells, solicits, or negotiates insurance contracts for compensation on behalf of an insurer. A producer may also be referred to as an agent or field underwriter.

Larceny – An unfair trade practice involving the commingling or misappropriation of premiums by a producer.

Mutual insurance company – A mutual insurance company as an insurance company owned and controlled by its policyholders. Mutual insurance companies issue participating policies that may pay dividends to policyholders.

Policy summary – The policy summary contains specific information on the provisions, benefits, and coverage of the policy applied for.

Principal – One of the parties in an agency relationship. The other is the agent who acts on behalf of the principal. This relationship describes the insurance business where a producer (i.e., agent) represents the insurer (i.e., the principal).

Rebating – Paying, offering, or giving anything of value not specified in the policy to any person as an inducement to apply for or renew an insurance policy. Rebating is illegal in most states.

Reserve – The combined funds required by law that are set aside by an insurer to assure the payment of future claims.

Stock insurance company – An insurance company owned and controlled by its stockholders who share in its divisible surplus. Generally, stock insurance companies issue nonparticipating life insurance. However, some of them also issue participating life insurance.

Surplus – The amount by which the assets of an insurer exceed its liabilities.

Temporary license – A license issued to an applicant who is being considered for appointment as an agent by another license holder, an insurer, or a health maintenance organization.

Twisting – Making a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, or surrender of an insurance policy with the intention of writing the insurance with another insurer.

Unauthorized (non-admitted) insurer – An insurance company that has been denied or not yet applied for a certificate of authority and may not sell or solicit insurance in this state.

Unfair trade practices – All states have regulations prohibiting these activities. Also called unfair marketing practices, such activities are illegal and subject the individual engaging in these activities to monetary fines and/or imprisonment. These unfair acts include but are not limited to rebating, twisting, misrepresentation, defamation, coercion, boycott, larceny, and perjury.