Texas Statutes And Rules Pertinent To Property And Casualty Insurance Practice Test

How does Texas address unlicensed activity in the insurance market?

Requires licensing only after a claim is filed Regulates licensing to prevent unlicensed practice; imposes penalties Encourages unlicensed activity with tax breaks Does not regulate licensing

Correct Answer:

Regulates licensing to prevent unlicensed practice; imposes penalties

Explanation:

In Texas, the system rests on requiring licensing to perform insurance activities and enforcing penalties for anyone who operates without that license. This protects consumers by ensuring only qualified, regulated individuals can sell or negotiate insurance, and it gives regulators the tools—such as fines, cease-and-desist orders, and other penalties—to stop unlicensed practice. The other options aren’t accurate because licensing isn’t granted only after a claim, there is formal regulation of licensing, and there are no tax breaks that promote unlicensed activity.

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