Powers and Duties of the Texas Insurance Commissioner

The Texas Department of Insurance (TDI) is the state agency responsible for regulating the insurance industry within the state. At the head of this agency is the Commissioner of Insurance. The Commissioner is appointed by the Governor and confirmed by the Texas Senate. While the Commissioner is the chief executive of the department, it is vital to remember for the complete TX General exam guide that the Commissioner does not write insurance laws—those are enacted by the State Legislature. Instead, the Commissioner is tasked with enforcing and administering the Texas Insurance Code.

Understanding the balance of power between the legislative, judicial, and executive functions of the Commissioner is a primary focus of the practice TX General questions. Candidates must distinguish between what the Commissioner is required to do and what they have the permission to do under state law.

The Commissioner’s primary responsibility is to protect the public interest and promote a competitive insurance market. To achieve this, the Commissioner is granted several specific powers:

• Rulemaking: The Commissioner has the authority to adopt rules and regulations to execute the duties of the Department. These rules must be consistent with the Texas Insurance Code.
• Licensing: The Commissioner issues, denies, suspends, or revokes licenses for agents, brokers, adjusters, and other insurance professionals.
• Certificates of Authority: No insurance company may transact business in Texas without a Certificate of Authority issued by the Commissioner.
• Complaints: The Commissioner maintains a system to receive and investigate complaints from the public regarding insurers and agents.
• Enforcement: The Commissioner has the power to investigate any person or entity suspected of violating insurance laws or engaging in unfair trade practices.

To ensure the financial solvency of insurance companies and to verify that they are treating policyholders fairly, the Commissioner has the power to examine the records of any insurance company authorized to do business in Texas. Under the law, the Commissioner must examine every carrier at least once every five years. However, the Commissioner can order an examination as often as deemed necessary.

During an examination, the insurer must provide free access to all books, records, and documents. If the Commissioner believes an insurer is in hazardous financial condition, they may take supervisory action or place the company into receivership. Importantly, the cost of the examination is borne by the company being examined, not the state.

When the Commissioner believes an individual or company is engaging in unauthorized insurance activity or unfair trade practices, they may issue a Cease and Desist Order. This order requires the party to stop the illegal activity immediately. If the person fails to comply, the Commissioner can seek an injunction from the Attorney General.

If a person or company is found to have violated the Insurance Code, the Commissioner may impose the following disciplinary actions:

• Administrative Penalty: A fine not to exceed $25,000 per violation.
• Restitution: Ordering the person to pay back consumers who were financially harmed.
• Probation: Placing the licensee on probation for a specified period.
• Suspension or Revocation: Removing the legal right of the agent or company to conduct insurance business in Texas.

Before these penalties become final, the accused party generally has the right to a hearing. The Commissioner must provide a written notice of the charges at least 10 days before the hearing date.