Property and Casualty Insurance · Texas statutes and rules common to property and casualty insurance · 9 min read
Commissioner of Insurance powers, investigations and penalties for Texas P&C agents
- Identify the official roles, duties, and appointment procedures of the Texas Commissioner of Insurance and the Texas Department of Insurance.
- Explain Texas Department of Insurance investigation procedures, carrier examination frequencies, inquiry response deadlines, and complaint recordkeeping rules.
- Describe the disciplinary actions, administrative penalties, civil penalties, and emergency cease and desist procedures applicable under Texas insurance law.
Role of the Commissioner and the Texas Department of Insurance
In the Texas Insurance Code and other insurance laws, 'Commissioner' means the commissioner of insurance (Tex. Ins. Code §31.001(1)). In these same laws, 'Department' means the Texas Department of Insurance (Tex. Ins. Code §31.001(2)). The commissioner serves as the department's chief executive and administrative officer (Tex. Ins. Code §31.021(a)). The commissioner must administer and enforce the Texas Insurance Code, other state insurance laws, and other laws granting jurisdiction or applicable to the department or commissioner (Tex. Ins. Code §31.021(a)). The commissioner also holds all the powers and duties vested in the department by state insurance laws and Title 5 of the Labor Code (Tex. Ins. Code §31.021(b)). The commissioner may adopt rules necessary to implement the title containing Section 4001.005 and to meet the minimum requirements of federal law, including regulations (Tex. Ins. Code §4001.005).
The Texas Department of Insurance carries broad administrative duties established by Texas law. The department must regulate the business of insurance in Texas (Tex. Ins. Code §31.002(1)). The department must administer the Texas workers' compensation system as provided by Title 5, Labor Code (Tex. Ins. Code §31.002(2)). It must also ensure that the Texas Insurance Code and other laws regarding insurance and insurance companies are executed (Tex. Ins. Code §31.002(3)). Furthermore, the department must protect and ensure the fair treatment of consumers (Tex. Ins. Code §31.002(4)). Finally, the department must ensure fair competition in the insurance industry in order to foster a competitive market (Tex. Ins. Code §31.002(5)).
The governor appoints the commissioner with the advice and consent of the Texas Senate (Tex. Ins. Code §31.022(a)). The commissioner serves a two-year term that expires on February 1 of each odd-numbered year (Tex. Ins. Code §31.022(a)). The governor must appoint the commissioner without regard to race, color, disability, sex, religion, age, or national origin (Tex. Ins. Code §31.022(b)). When advisory committees are established, an advisory committee must be structured and used to advise the commissioner, the state fire marshal, or department staff, and may not be responsible for rulemaking or policymaking (Tex. Ins. Code §32.151(b)).
Common mistakes
- Believing advisory committees have the legal authority to adopt official department rules, when Texas law specifies they may only advise and are barred from rulemaking or policymaking (Tex. Ins. Code §32.151(b)).
- Confusing the general administrative inquiry deadline with examination periods; agents must respond in writing to a department inquiry within 15 days, with an available 10-day extension (Tex. Ins. Code §38.001(c)).
- Mixing up administrative and civil penalties for violating a Chapter 541 cease and desist order; the administrative penalty cannot exceed $1,000 per violation or $5,000 total, whereas the court civil penalty is up to $50, or up to $500 if wilful (Tex. Ins. Code §§541.110(c), 541.111).
- Assuming an authorization suspension can last indefinitely, when Texas law limits a suspension to a specified period not to exceed one year (Tex. Ins. Code §82.052(1)).
Key points
- The Texas Commissioner of Insurance is appointed by the governor for a two-year term ending on February 1 of odd-numbered years, confirmed by the Texas Senate, and serves as the chief executive officer of the department (Tex. Ins. Code §§31.021(a), 31.022(a)).
- The department regulates Texas insurance, executes insurance laws, protects consumers, ensures fair competition, and administers the Texas workers' compensation system under Title 5 of the Labor Code (Tex. Ins. Code §§31.002, 31.021(b)).
- Carrier examinations must take place at least once every five years for established carriers, granting examiners unrestricted access to books, records, and the power to examine individuals under oath (Tex. Ins. Code §§401.052, 401.054).
- Licensees must respond in writing to department inquiries within 15 days of receipt, and the department must grant a 10-day extension upon receiving a written request (Tex. Ins. Code §38.001(c)).
- The commissioner must order remedial action or cessation of business if a stock insurer's surplus is impaired by more than 50 percent, or if a mutual, Lloyd's, or reciprocal entity's applicable aggregate is impaired by more than 25 percent (Tex. Ins. Code §404.053(a)).
- Available sanctions include suspension of an authorization under Section 82.052 for a specified period of no more than one year, cancellation or revocation of an authorization, probation for a person whose license has been suspended, reprimand of a license holder, administrative penalties, and restitution orders (Tex. Ins. Code §§82.051 to 82.053, 4005.102).
- An emergency cease and desist order becomes final on the 61st day after service unless the recipient requests a hearing in writing by the 60th day, after which the department must docket the case at the State Office of Administrative Hearings within 30 days (Tex. Ins. Code §§83.051(b), 83.053, 83.054(a)).
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