Texas Insurance Statutes You Need to Know for the P&C Exam

About 30 of the 150 exam questions (20%) are Texas-specific. This is the section where candidates who studied with generic, non-Texas materials get blindsided.

National insurance concepts are the same everywhere, but every state has its own regulatory quirks. Texas has more than most — from the Texas Windstorm Insurance Association to its unique approach to workers' compensation.

If you're using study materials that don't cover Texas-specific statutes in detail, you're leaving 30 questions to chance. That's the difference between passing and failing.

TDI is the state agency that regulates insurance in Texas. Key facts for the exam:

• Commissioner of Insurance: Appointed by the Governor, confirmed by the Senate. Serves a 2-year term.
• Authority: TDI can issue, suspend, and revoke licenses. It can fine agents up to $25,000 per violation.
• Rate regulation: Texas uses a "file and use" system for most lines — insurers file rates with TDI and can use them immediately unless TDI objects.
• Consumer complaints: TDI handles consumer complaints against insurers and agents. Agents must respond to TDI inquiries within a specified timeframe.

The exam will test your knowledge of what it takes to get and keep a Texas insurance license:

• Age: Must be at least 18 years old
• Pre-licensing education: 40 hours from a TDI-approved provider
• Exam: Pass the Pearson VUE state exam with 70% or higher
• Background check: Fingerprints submitted, no disqualifying criminal history
• Continuing education: 24 hours every 2-year license period, including 2 hours of ethics
• License renewal: Every 2 years, with CE requirements met

Common exam question: What happens if an agent lets their license lapse? They must complete all CE requirements and may need to retake the exam if the lapse exceeds a certain period.

This is one of the most-tested areas within Texas statutes. Know these prohibited practices:

• Misrepresentation: Making false statements about a policy to induce a sale
• Twisting: Convincing a policyholder to cancel an existing policy and buy a new one, primarily for the agent's commission benefit
• Churning: Excessive replacement of policies using dividends or cash values from the existing policy
• Rebating: Offering anything of value (gifts, cash back) as an inducement to purchase insurance — with limited exceptions
• Defamation: Making false statements about a competitor to harm their business
• Unfair discrimination: Charging different premiums to people with the same risk profile based on protected characteristics

Two Texas-specific programs that come up on almost every exam:

TWIA (Texas Windstorm Insurance Association):

• Provides wind and hail coverage in 14 coastal Texas counties and parts of Harris County
• Acts as the insurer of last resort for wind/hail — you must be denied by the standard market first
• Properties must meet building code requirements (WPI-8 certification)
• Funded by premiums and assessments on insurers doing business in Texas

FAIR Plan (Fair Access to Insurance Requirements):

• Provides basic property insurance for high-risk properties that can't get coverage in the standard market
• Covers fire and extended coverage perils
• Higher premiums than standard market
• Also an insurer of last resort

Exam tip: TWIA = wind/hail in coastal areas. FAIR Plan = fire/property for high-risk properties anywhere in Texas. Don't confuse them.