The national guides cover the P&C basics: perils, hazards, valuation, negligence and contract law. This guide adds the Texas rules on rate and form filing, commercial cancellation and nonrenewal, claim deadlines, surplus lines and the guaranty association. Questions on these come up on the P&C and Personal Lines exams. Homeowners and auto rules are in their own Texas guides.

Rates and forms

• Rates may not be excessive, inadequate or unfairly discriminatory (TIC 2251.051, 2251.052).
  • Excessive: likely to produce an unreasonably high long-term profit.
  • Inadequate: not enough to cover losses and expenses, endangering solvency or competition.
• Rates are "file and use." They may be used on and after filing (2251.101, 2251.103).
  • The Commissioner may disapprove within 30 days, and may extend that once by 30 days.
• Forms are filed at least 60 days before use. They're deemed approved after 60 days unless the Commissioner acts (2301.006).
  • A form can be disapproved if it's unjust, deceptive or against public policy (2301.007).
• Large risks are exempt from form filing (2301.004). A large risk has, for example, property values of $5 million or revenues of $10 million.
• Insurers, including TWIA, the FAIR Plan and TAIPA, must file their personal auto and residential property underwriting guidelines with TDI (38.002).

Commercial cancellation and nonrenewal (TIC 551, Subchapter B)

Cancellation

• After 60 days, or at any time on a renewal policy, an insurer may cancel only for (551.052):
  • fraud in obtaining coverage
  • nonpayment
  • an increase in hazard within the insured's control that would raise the rate
  • loss of reinsurance
• Notice is due no later than the 10th day before cancellation takes effect (551.053).

Nonrenewal

• At least 60 days' notice before expiration (551.054).
• If the notice is late, coverage continues until the 61st day after notice is mailed.

Other notices

• Material changes on renewal need 30 days' notice, to the insured and the agent (551.056).
• A statement of reasons must give the precise incident or risk factors and the source of the information (551.002, 551.055).
• Commercial declinations go to the applicant's agent, who must disclose them (551.007).
• Moving an insured to another company in the same group isn't a nonrenewal (551.004).

Claim deadlines (TIC 542, Subchapter B)

• The prompt-pay subchapter doesn't apply to workers comp, mortgage guaranty, title, fidelity and surety, or marine insurance (542.053).
• Liability claims: the insured is told of an initial settlement offer within 10 days and of the settlement within 30 days (542.153).
• Liquidated demand: a total fire loss to insured real property is payable at the full policy amount (862.053). This doesn't apply to personal property.
• An agent can't knowingly write fire insurance for more than the reasonable value of the property (4005.055).

Surplus lines (TIC 981)

• Placement requires a diligent effort in the admitted market, through a licensed surplus lines agent. Exempt commercial purchasers may waive the diligent effort (981.004).
• Documents must disclose that TDI doesn't audit the insurer's finances and that the insurer is not a guaranty association member (981.101).
• The tax is 4.85% of gross premiums (225.004).
• An eligible insurer needs at least $15 million in capital and surplus (981.057).

Guaranty association (TIC 462)

Common exam traps

• Rates are file and use. Forms are filed 60 days before use.
• Commercial cancellation after 60 days has 4 grounds, with 10 days' notice. Commercial nonrenewal needs 60 days.
• Claims: 15 days to acknowledge, 15 business days to decide, 5 business days to pay. Late payment brings 18% interest.
• Surplus lines tax: 4.85%.
• TPCIGA: $300,000 per claim, $25,000 unearned premium, $50 million net-worth exclusion.