Property

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Property Casualty 2008Compliance Conference
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Enforcement Hot Topics
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• Pursuant to Tex. Ins. Code Ann. 31.002, TDI
  must
• Regulate the business of insurance in Texas
• Ensure the Texas Insurance Code and other laws
  regarding insurance and insurance companies are
  executed.

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Unauthorized Insurance

• A person, including an insurer, may not directly
  or indirectly do an act that constitutes the
  business of insuranceexcept as authorized by
  statute.
• TEX. INS. CODE ANN. 101.102

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How does TDI learn of violations of the insurance
code or agent misconduct?

• Complaints
• Consumer
• Agent
• Company
• Anonymous
• Internal Discovery
• Examination
• Failure to File
• Failure to Respond to TDI Inquiry
• Sister Agency
• Law Enforcement

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Investigations

• The Texas Department of Insurance may investigate
  and make reports regarding alleged violations of
  the insurance code and misconduct on the part of
  agents.
• TEX. INS. CODE ANN. 4001.007

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What area of TDI is responsible for disciplinary
action based upon violations of the insurance
code and misconduct on the part of agents?

• Enforcement Division

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Enforcement Division Teams

• Health, HMO, Life and Viatical
• Licensing
• PC, Windstorm and Fire Marshal
• Rate, Title and Financial

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Organizational Structure
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Pending Enforcement CasesAs of 3/31/2008Total
number of Cases 1347
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Who is subject to the Commissioners Authority?

• Holder of
• Permit
• License
• Certificate of Authority
• Certificate of Registration
• Other Authorization Issued or Existing

AUTHORIZATION
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Additional Regulatory Authority

• TEX. INS. CODE ANN. Chapter 82 applies to
• an individual or
• a corporation, association, or partnership
• or other artificial person
• who is engaged in the business of insurance or is
  regulated by the Commissioner

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Business of Insurance

• Making or proposing to make, as an insurer, an
  insurance contract
• Taking or receiving an insurance application
• Receiving or collecting any consideration for
  insurance, including
• a premium
• a commission
• Issuing or delivering an insurance contract
• Directly or indirectly acting as an agent for or
  otherwise representing or assisting an insurer or
  person in
• Soliciting, negotiating, procuring or effecting
  insurance
• Disseminating information relating to coverage or
  rates
• Forwarding an insurance application
• Inspecting a risk
• Setting a rate

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Methods of Investigation

• (1) TIC 38.001 Inquiry
• (2) TIC 101.104 Inquiry
• (3) Subpoena
• Witness Statements
• Under Cover

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TEX. INS. CODE ANN. 38.001

• TDI may address a reasonable inquiry to
• any insurance company, including a Lloyds plan
  or reciprocal or interinsurance exchange
• an agent
• or other holder of an authorization
• Relating to
• the persons business condition
• any matter connected with the persons
  transactions that the Department considers
  necessary for the public good or for the proper
  discharge of the Departments duties

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38.001 Inquiry

• Written response due the 10th day after the date
  the inquiry is received

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Can the 10 days be extended?

• Commissioners Bulletin No. B-0040-00
• Grant Extensions Under Appropriate Circumstances
• Written Request for Extension prior to initial 10
  day period
• Specific reason a response cannot be made in
  accordance with 38.001
• Provide date complete response will be submitted

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101.104 Inquiry
Subject shall IMMEDIATELY provide information to
the Commissioner
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Subpoena
The Commissioner may issue a subpoena regarding a
matter the Commissioner has authority to consider
or investigate TEX. INS. CODE ANN. 36.151
36.152
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What Can Be Subpoenaed?
Attendance and testimony of a witness
Production of Records Is there a territorial
limit on subpoenas? Throughout the State of
Texas TEX. INS. CODE ANN. 36.152
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Sanctions

• Sanctions for violation of or failure to comply
  with a specific provision of the Insurance Code
  or its rules and regulations include
• Cancel, suspend or revoke any permit, license,
  certificate of authority, certificate of
  registration, or other authorization
• Deny an application for an original license
• Probated license suspension
• Order the possessor of such permit, license,
  certificate of authority or certificate of
  registration to
• Cease and desist from the specified activity or
  from failure to comply with the Insurance Code
  and/or its rules and regulations
• Pay an administrative penalty
• Make restitution to all Texas residents, Texas
  insureds, and entities operating in Texas harmed
  by the violation or failure to comply and
• A combination of the sanctions.
• TEX. INS. CODE ANN. 82.001, 82.051 - 82.054,
  4005.101, 4005.102, 4005.103, 4005.109.

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PC, Windstorm and Fire Marshal Team

• On average 200 open cases
• Approximately
• 65 Property Casualty
• 30 Fire Marshal
• 5 Windstorm
• Sources
• Amusement Rides Section
• Consumer Protection
• Financial Examinations
• PC Commercial Lines
• PC Personal Lines
• State Fire Marshals Office
• Workers Compensation Classification/Premium
  Calculation
• Windstorm Inspections

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PC, Windstorm and Fire Marshal Team

• Property and Casualty (approximate percentages)
• 40 Unauthorized
• Unauthorized Entities (TEX. INS. CODE ch. 101)
• Unauthorized Forms (TEX. INS. CODE ch. 2301)
• 20 Claims Handling (TEX. INS. CODE ch. 542)
• Unfair Settlement Practices
• Prompt Payment of Claims
• 10 Unfair, Deceptive, and Prohibited Practices
• 10 Data Reporting and Required Filings
• Data Reporting (TEX. INS. CODE ANN. 38.151-
  38.163)
• Quarterly Closed Claim Reports
• Annual Aggregate Closed Claim Reports
• Annual Closed Claim Reconciliation Forms
• Credit Scoring Models (TEX. INS. CODE ANN.
  559.151)
• 5 Amusement Rides (TEX. OCC. CODE ANN. ch. 2151)
• Insurance
• Inspections
• Schedule for Mobile Operations
• 5 Workers Compensation (TEX. INS. CODE ANN.
  chs. 2051-2053)

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PC, Windstorm and Fire Marshal Team

• State Fire Marshal
• Extinguisher (TEX. INS. CODE ANN. art. 5.43-1)
• Alarm (TEX. INS. CODE ANN. art. 5.43-2)
• Sprinkler (TEX. INS. CODE ANN. art. 5.43-3)
• Fireworks (TEX. OCC. CODE ANN. ch. 2154)
• Licenses, Certificates, Permits
• Misconduct
• Failure to Maintain Required Insurance

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PC, Windstorm and Fire Marshal Team

• Windstorm Inspections (TEX. INS. CODE ANN.
  2210.251-2210.256)
• Professional Engineers Appointed as Qualified
  Inspectors to conduct inspections for eligibility
  for windstorm and hail insurance coverage from
  the Texas Windstorm Insurance Association.
• Applications
• Misconduct
• Unauthorized

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Rate, Title and Financial Team

• 22 RATE CASES
• 169 TITLE CASES
• 15 FINANCIAL CASES

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Rate, Title and Financial Team

• RATE CASES
• 22 cases mainly homeowners insurance rates

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Rate, Title and Financial Team

• TITLE CASES
• 71 cases escrow officer license
• 68 cases title agent (failure to file annual
  audit, guaranty fees)
• 23 cases unauthorized title insurance
• 15 cases illegal rebating
• 15 cases improper closing
• 1 case real property rates
• 1 case personal property (UCC) rates

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Rate, Title and Financial Team

• FINANCIAL CASES
• 11 cases of agent acting without a license
• 4 cases PG-3 related issues