Texas Insurance Law and Regulations Common to All Lines
One regulator, one statute, many duties
The Texas Department of Insurance (TDI), headed by the Commissioner of Insurance, administers the Texas Insurance Code and adopts rules published in Title 28 of the Texas Administrative Code. Surplus lines agents are regulated by the same statutes that govern every other producer - Chapter 981 only adds a layer.
Licensing and conduct. A producer must hold the license matching the lines sold, be appointed by the insurer, and complete biennial continuing education, including ethics. Premium collected belongs to the insurer or insured, not the agent: it is held in a fiduciary capacity, must not be commingled with personal or operating funds, and must be accounted for on demand.
Unfair trade practices (Chapter 541). Misrepresentation, false advertising, twisting, unfair discrimination, and rebating are prohibited. Rebating is unlawful even when the customer asks for it, and it does not become lawful because the inducement is small or non-cash.
Prompt payment of claims (Chapter 542). The insurer must acknowledge a claim within 15 days, decide within the statutory window once it has all items it reasonably requires (with a 60-day outer limit for delays), and pay promptly after acceptance. Penalties and interest can attach to unreasonable delay.
Fraud (Chapter 701) covers false claims and false statements to insurers. Chapter 462 creates the Texas guaranty association - which does not cover surplus lines, self-funded ERISA plans, or life/health/federal flood business.
Common traps: treating a certificate of insurance as a contract (it is only evidence of coverage); assuming an agent may sell any line once licensed; assuming the guaranty fund rescues any policyholder; forgetting that a producer's records and advertising are subject to TDI examination.
Rule of thumb: "Acknowledge in 15 days, resolve within the statutory window, 60 days as the outer limit."