Discrimination, fraud, rating practices and commission sharing

Unfair Discrimination and Illegal Inducements

Texas law strictly prohibits unfair discrimination in underwriting and rating. A person may not refuse to insure or provide coverage to an individual because of the individual's race, color, religion, or national origin (Tex. Ins. Code §544.002(a)(1)). Furthermore, a person may not charge an individual a rate that is different from the rate charged to other individuals for the same coverage because of race, color, religion, or national origin (Tex. Ins. Code §544.002(a)(1)). A person also may not charge an individual a different rate for the same coverage, or refuse to continue to insure an individual, because of age, gender, marital status, or geographic location (Tex. Ins. Code §544.002(a)(2)). Additionally, a person may not limit the amount, extent, or kind of coverage available for an individual because of disability or partial disability (Tex. Ins. Code §544.002(a)(3)).

The Texas Insurance Code provides specific rules regarding marital status and land rights. An insurer may not refuse to continue to insure, limit the amount, extent, or kind of coverage available to, or charge a different rate to an individual because the individual is widowed or because their marital status otherwise reflects the death of a spouse; the rate charged must not differ from the rate that would be charged if the individual was married (Tex. Ins. Code §544.002(d)(1), (2)). However, an insurer or health maintenance organization is not prohibited from considering marital status in defining persons eligible for dependent benefits (Tex. Ins. Code §544.002(b)). Requirements to provide title insurance coverage relating to possible community, homestead, or other marital rights in land are not prevented under unfair discrimination provisions (Tex. Ins. Code §544.002(c)), and a title insurance company or title insurance agent may impose a reasonable requirement on a widowed applicant for determining heirship, probate matters, or similar issues in the same manner as an individual who is not widowed (Tex. Ins. Code §544.002(e)).

Texas prohibits the special favors and inducements specified in Tex. Ins. Code §1806.153, but permits qualifying promotional advertising items, educational items, and traditional courtesies valued at $25 or less under Tex. Ins. Code §4005.053(d). An insurer or its agent may not grant or contract for a special favor or advantage in dividends or other profits, commissions or division of commission, or any position, valuable consideration, or inducement not specified in an insurance policy (Tex. Ins. Code §1806.153(a)(1), (3), (4)). Insurers may not directly or indirectly give, sell, or purchase stocks, bonds, or other securities, or give, sell, or purchase anything of value not specified in the policy as an inducement to insurance (Tex. Ins. Code §1806.153(b)(1), (3)). Any insurer or representative violating these rules has engaged in unjust discrimination (Tex. Ins. Code §1806.153(c)). For example, if an agent named Carlos offers stock shares to a business owner named Elena to convince her to buy a commercial liability policy, Carlos commits unjust discrimination under Texas law.

Finally, general business practices must remain competitive. It is an unfair method of competition or an unfair or deceptive act or practice in insurance to commit through concerted action, or agree to commit, an act of boycott, coercion, or intimidation that results in or tends to result in an unreasonable restraint of or a monopoly in the business of insurance (Tex. Ins. Code §541.054).