Chiemerie Chigozie Chibuzor

BUILDING A PROPERTY & CASUALTY INSURTECH IN TEXAS (Regulatory requirements , Laws, MGAs and Best Practices) Compiled by Chiemerie Chibuzor Table of Contents Introduction Building Insurtech in Texas 3 LAWS 3 Enforcement actions GETTING A PRODUCER LICENSE 3 4 Application steps: 5 Non-resident license 6 Temporary license 6 Emergency license 6 Provisional permit 6 Laws: Texas Insurance Code 6 PROPERTY AND CASUALTY GENERAL 8 CLAIMS HANDLING 10 Underwriting 11 BUSINESS MODEL 11 Partnership with MGAs ( Managing General agents) 12 Attributes to Look for in an MGA 12 1. Access to Product 12 2. Access to Distribution 13 3. Access to Specific Expertise 13 4. Underwriting Track Record 13 5. Developed Control Functions 13 Some directories to find MGAs 13 Property and casualty insurance checklist 14 Property Insurance 14 Casualty Insurance 14 FREQUENTLY ASKED QUESTIONS 15 PROJECT Insurtech in Texas Client / Sign off Ben Kigobadi Business Analyst Chiemerie Chibuzor Project Status In progress Introduction Building Insurtech in Texas Setting up a successful Insurtech startup in Texas requires adherence to the insurance laws guiding the state. Below are details laws required LAWS ● Texas Insurance Code ( TIC) Click here to read Insurance disciplinary Orders: These are disciplinary actions taken against for violating policies and failure to file surplus line policies. These disciplinary orders can be found here.Here is an example of some of the many Insurance companies who violated these laws measurements taken against them Enforcement actions Insurance Disciplinary Actions ● McGriff Insurance services, LLC of Greensboro Click here to read ● CRC Insurance services LLC of Birmingham AL Click here to read ● Jeannes Insurance Group LLC of Houston Click here to Read Worker compensation disciplinary orders These are actions taken against employers who fail to provide the required coverage of provisions required of them or engage in practices that violate workers compensation laws. Ir failure to carry workers compensation as required by law or attempt to discourage employees from filing legitimate claims. Below are examples of litigations against employers who violated. ● Amerisure Insurance Company Click here to read ● American Zurich Insurance Company Click here to read ● AIU Insurance Company Click here to read Fraud Case Disposition: These are outcomes of legal proceedings involving insurance fraud allegations fraud case disposition within insurance could be guilty verdict, not guilty verdict, dismissal and Settlement, deferred prosecution conviction and mistrial. Click here to read State Fire Marshal office orders Click here to read For more Information contact:- GETTING A PRODUCER LICENSE There are cases where you might need a producer license which requires a specific role within the company and activities they perform. If your startup sells insurance products directly to customers they will need a producer license, this will also demonstrate your knowledge of the insurance industry and properly understand the regulatory landscape to potential customers and partners. Finally if you want to maintain direct control over the sales process within your company , obtaining a producer license allows you to personally oversee customer interactions and ensure compliance with regulations. Supervising Licensed producers If you oversee the activities of licensed producers within the company , you might not need a producer license. However it is important that anyone who solicits, negotiates or procures insurance for others need a producer license. They include ● Insurance Agent ● Insurance Brokers ● Independent Adjusters. Benefits of getting a producer license Getting a producer license will also give you generous insights on how to navigate various insurance requirements and policies peculiar to P & C. If your primary focus is on managing the company’s overall operations obtaining a producer license may not be necessary , this can be delegated to MGAs you partner with. Compliance Compliance is key in the insurance industry, it is pertinent to ensure that your insurtech startup operates in compliance with texas department of insurance , this includes having all the necessary licenses for any staff members selling insurance and ensuring that the license of any MGA you partner with is updated. NB: In case you might consider getting a producer license I have scraped the Texas Department of Insurance website to get all the information you need. Applying for Producer License in Texas. Applying for a license requires you to take an exam, how ever you do not need to take it if ● Your license has expired for more than 90 days, but less than one year. ● You don’t live in Texas, but you have a license in good standing in a reciprocal state. ● You have completed a TDI-approved course or training program within the last 12 months in adjusting losses. To find approved courses, create an account on the Sircon (Vertafore) website. ● You have the chartered property and casualty underwriter or associate in claims designation. Application steps: 1. Take an exam. 2. Begin the application process on TDI’s online fingerprint portal. 3. Apply for a license. Note: If you want to apply for an agency (firm) license: ○ You can now apply online by using Sircon. Review the following tutorials before starting the application process: ■ Resident adjuster agency application (PDF) ■ Non-resident adjuster agency application – via reciprocity (PDF) ■ Non-resident adjuster agency application – no home state license (PDF) ○ The application fee is $50. ○ When filling out the Sircon application, you will need to give information for: ■ All executive officers, directors, or partners who administer the agency’s operations in Texas. ■ All individuals and entities in control of the agency’s operations. ○ At least one officer or active partner must have a property and casualty adjuster license with the same authority. Other requirements you can obtain licenses Non-resident license If you have an active license in good standing in your resident / home state, you can apply for a non-resident license in Texas using Sircon. The application fee is $50. Temporary license A temporary license is not offered for a property and casualty adjuster license. Emergency license A 90-day emergency license is offered for a property and casualty adjuster license. To learn more, go to our Adjuster: emergency (catastrophe) license web page. Provisional permit A provisional permit is not offered for a property and casualty adjuster license. Laws: Texas Insurance Code Laws about the General Lines – Property and Casualty license can be found in the Texas Insurance Code Sections-,-,-, and-. For further questions and inquiries you can reach out to TDI’s helpdesk below; ● Questions? Call us at- or email- ● Tips for successful application processing. Source: General Lines Property and casualty Managing your license: In cases where you made some changes in the agency you will have to update your contact information to effect those changes, print your license, and in cases of renewal you will have to pay a renewal fee of $50 dollars , failure to pay before your license expires attracts extra $25 dollars and be fully compliant with continuing education. Continuing Education certifies and validates your license, however this requires that the CE courses be taken any time during each two-year term, and must be completed before midnight Central Time (CT) on your license expiration date to avoid fines and delays in your license renewal. There are also provisions to cancel your license and also you can obtain proof of license certificate for $11 including additional charges incurred by sircon processing portal. Keywords ● Update contact information ● Print license ● License renewal ● Continuing education credits ● Cancel license ● Letter of certification Click here for all information on managing licenses. PROPERTY AND CASUALTY GENERAL Regulatory Requirements and Considerations: Texas Department of insurance (TDI): You can find all inquiries relating to property and casualty best pratices in Texas https://www.tdi.texas.gov/agent/adjuster-property-casualty-apply.html Policy Forms ○ General – Appraisal Umpire and Mediator forms ○ Appraisal refers to the method of resolving disputes over the value of property or the amount of a loss between an insurance company and the policyholder. Here each party selects an appraiser to assess the value or loss independently. ○ Umpire: In insurance appraisals an Umpire is a neutral third party appointed to resolve disputes when the appraisers chosen by the company and the policy cannot agree on the value of the property or the total amount of loss incurred by either parties. ○ Mediator: Mediator is a neutral third party who resolves dispute within parties , communicate, negotiate , and reach a mutually acceptable agreement. Mediator has the authority to to impose decision on both parties unlike the umpire Inspections – Loss Control and Amusement Inspection forms ■ Loss control forms are documents used by insurance companies or their representatives to conduct inspections of properties or businesses insured by the company. These forms include checklists to identify potential hazards such as fire risks, safety violations and security vulnerabilities etc. ■ Amusements Inspection forms are tailored towards assessing safety and risk factors associated with amusement parks, carnival rides and other venues. NB: Both forms play a crucial role in the underwriting process for insurance policies, helping Insurers to accurately assess risks and determine appropriate premiums. ● Personal Lines – Mold Remediation, Credit Information Disclosure and Residential Inspection forms personal lines form listings provide all documents needed throughout the Insurance lifecycle from application and underwriting to claims and policy management. ● Rate filing forms: These are documents submitted by insurance companies to the Texas Department of Insurance to request approval for proposed insurance rates. Read about it Here ○ Exhibit Forms are supplementary documents submitted alongside rate filing forms to provide supporting information. They may include actuarial studies, statistical data and other relevant information to justify the proposed insurance rates. Both forms facilitate the reasonableness of Insurance rates ensuring they are fair and equitable for policy holders while enabling insurance companies to maintain financial stability and viability. ● Title – Title Manual forms and Licensing and Title Examination forms ○ Title forms are used in the title insurance industry. It protects real estate owners and lenders against financial loss due to defects in title or legal ownership of a property. These forms contain information about properties ownership history, liens and other factors that may affect the property’s title. Title forms help facilitate the transfer of ownership by ensuring that the title is clear from any unresolved issues and claims. ● Windstorm ○ These form listings are documents containing information about insurance forms and policies related to windstorm coverage. It provides coverage for damage caused by windstorms, hurricanes, tornados and other wind related events. Thes listings help insurance agents, brokers and policy holders understand terms, conditions and coverage options available for windstorm insurance and facilitate the insurance application, underwriting and claims process. CLAIMS HANDLING All insurers authorized to do businesses in Texas must comply with the law relating to prompt payment of claims with the exception of Title insurance, fidelity, surety, guaranty bonds, inland marine, workers compensation and mortgage guaranty insurance. ● Claims Submission and Initial Response Your insurance company must acknowledge receiving your claims within 15 business days ( 30 days for surplus insurers). ● Investigation and Information request The insurance company investigates the claim and requests any necessary information from the policy holder. ● Claim decision Once they have all the information , the insurance company has 15 days ( 30 days if they suspect arson ) to accept, reject or request more time ( with additional 45 days to make a final decision). ● Payment deadlines Once the policyholder's claim is accepted , the insurance company must pay within 5 business days ( 20 days for surplus lines insurers). ● Penalties for delay If the insurance company fails to pay the policyholder beyond 60 days after receiving all information , they will be liable to pay the policy holder the claim amount plus 18% annual interest and incurred attorney fees. ● Catastrophes Claims deadlines may be extended by 15 days in the event of a major weather event declared by the Texas Department of Insurance (TDI). ● Third party claims If a lawsuit is filed against the policyholder, the insurance company will have to send notification within 10 days of receiving a settlement offer and within 30 days of any final offer from the policyholder. The Texas prompt payment claim laws compels insurance companies to handle claims effectively, fairly and transparently. This aims to protect policyholders from unreasonable delays and ensures they receive timely compensation for covered losses. White it adds some administrative burden complying with the law helps maintain an efficient and transparent insurance system in Texas. ● See law on claims handling in Texas here Underwriting The Texas Department of Insurance strictly enforces regulations requiring insurance companies and agents to determine insurance rate and underwriting decisions based on the factors directly related to the risk of loss for an individual. Factors like marital status, gender, insurance limits, age, or home value cannot be used to set insurance prices or decide who gets coverage. However there are some exceptions to these rules , if TDIs official rating manual allows it, certain discriminations may be permitted. For instance , discounts for insuring multiple cars or variation in auto insurance rates may be allowed if explicitly mentioned in the TDIs rating manual. See PDF document on Underwriting DOs and Don'ts in Texas - Here BUSINESS MODEL As you inquired about MGA models, I deduced that you have already considered the Full carrier model, brokerage model, and would want to try out a hybrid model of partnering with an MGA and the Insurtech platform model. One of the outstanding benefits is the wider market reach in which partnering with MGAs markets your policies to its network of agents while offering quicker market entry while also attracting independent agents and brokers with your insurtech platform's functionalities. Other Benefits of this model : ● Scalability: Your insurtech platform can automate tasks like quoting, self service portals for customers, AI integration and analytics, policy issuance and policy issuance for the MGAs network allowing them to handle a larger volume of business. ● Data Driven Decisions: By integrating data from the platform and the MGA operation, you gain valuable insights into customer behavior,risk profiles,and market trends. This data can be used to improve underwriting decisions, improve underwriting decisions, personalize insurance products and develop new ones. ● Competitive Advantage: The hybrid model has a huge benefit for your startup , MGAs benefit from your technology and you benefit from their wider reach, while their are limitations partnering with MGAs developing a clear value proposition , user friendly platform and adopting latest innovation technologies will enable you operate sustainable with opportunities for growth. Partnership with MGAs ( Managing General agents) Successful Partnership with MGA involves identifying their strengths, deep dive into their experience, reputation and areas of specialization as it suits your business model as an insurtech. You also have to ensure that their license aligns with Texas Department of Insurance requirements and it is up to date. Attributes to Look for in an MGA 1. Access to Product ● Does the MGA have a unique Value proposition, approach to underwriting or another attribute ● Why are they different from any other underwriter ? 2. Access to Distribution ● Does the MGA have access to distribution networks otherwise unavailable to an insurer? ● Does this create an opportunity to grow the portfolio in a new area? 3. Access to Specific Expertise ● What is the MGA’s sustainable competitive advantage? Could it be replicated elsewhere? ● Can the MGA contribute long-term to this capability and its success? 4. Underwriting Track Record ● Has the MGA proven that it can ‘beat the market’ and underwrite profitably? ● If it is a start-up, have its underwriters succeeded elsewhere? 5. Developed Control Functions ● How does the MGA look and feel operationally and how are losses and claims managed? ● Can it demonstrate that it underwrites in the way it claims? ● What systems are in place to oversee underwriters and ensure they adhere to guidelines? ● Can it make changes to programs as needed? Some directories to find MGAs ○ Assured Partners: Focused on P&C Employee benefits Click to search by location ○ Services provided by Assured Partners in Property niche Click here to read ○ Services provided by Assured Partners in Casualty niche Click here to read ○ Texas Department of Insurance Directory: The Texas Department of Insurance licenses, registers, certifies, and regulates people and businesses that sell insurance and adjust Texas property and casualty claims you can find list of Managing Agents Click here >> MGAS Directory ○ Look at USI INSURANCE SERVICES ON Property & Casualty Property and casualty insurance checklist Here are list of services within Property and Casualty, each with specific laws guiding them understanding the requirements can and help proffer exceptional services to policyholders as the case may be Property Insurance ● Homeowners Insurance ● Renters Insurance ● Commercial property Insurance ● Business risk Insurance ● Construction risk Insurance ● Earthquake Insurance ● Inland Marine Insurance Casualty Insurance ● Aviation/Hangarkeepers Liability Insurance ● Cyber Liability Insurance ● Captive Management Insurance ● Commercial Auto Insurance ● Environmental Liability Insurance ● Fiduciary liability Insurance ● Garagekeepers Legal Liability ● Liquor Liability Insurance ● Product/Premises Liability ● Professional Liability Insurance ● Railroad Protective ● Risk Transfer Programs ● Transportation Insurance ● Umbrella/Excess ● Unmanned Aircraft ● Workers’ Compensation/Employers Liability (including U.S. Longshore & Harbor Workers' Compensation Act and Defense Base Act insurance) ● Surety bonds FREQUENTLY ASKED QUESTIONS Policy Lifecycle: Q: How can I streamline the application and onboarding process for customers? Consider offering online applications with clear instructions and easy-to-use interfaces. Leverage automation for data verification and pre-fill information where possible. Texas Law: Texas does not mandate specific application processes, but ensures compliance with fair lending practices. Q: What data do I need to collect from customers during the application process? ○ You will need basic information like name, address, property details, and driving history for auto insurance. However, avoid collecting unnecessary data that may violate privacy regulations. Texas Law: Texas does not have specific data collection requirements beyond what's necessary for underwriting. However, comply with data security and privacy laws like the Texas Deceptive Trade Practices Act (DTPA). Q: How can I ensure accurate risk assessment and pricing for policies? Utilize data analytics to assess risk factors and set appropriate premiums. Consider offering discounts for safety features or preventative measures. Texas Law: Texas prohibits discrimination in pricing based on factors like marital status, gender (except for some auto rates), or age (with exceptions). Focus on risk-based pricing that aligns with TDI regulations. Q: What are the regulations around policy renewals and cancellations in Texas? Provide clear and timely notices for policy renewals and cancellations. Allow customers to cancel policies without penalty during a grace period. Texas Law: Texas requires insurers to provide written notice of non-renewal reasons at least 45 days before the policy expires. Cancellation notices must also be provided in writing, typically with a 10-day grace period. Q: How can I leverage technology to improve the claims process for customers? Offer online claim reporting and status tracking. Implement tools for easy document submission and communication with adjusters. Texas Law: Texas mandates prompt claim handling and payment within specific timeframes (outlined previously). Utilize technology to ensure efficient claims processing that complies with these regulations. Texas Law and Insurtech: Q: Are there specific licensing requirements for P&C insur-tech startups in Texas? Yes, all insurance providers operating in Texas, including insur-tech companies, need to obtain a license from the Texas Department of Insurance (TDI). Texas Law: Review the TDI website (https://www.tdi.texas.gov/) for licensing requirements and regulations specific to insur-tech businesses. Q: How can I ensure my insurtech platform complies with Texas data security and privacy laws? Implement robust data security measures and have clear privacy policies outlining data collection, usage, and customer rights. Texas Law: Comply with the Texas DTPA and other relevant data security and privacy laws, such as the Texas Security Breach Notification Act. Q: Can I offer innovative insurance products or features in Texas? Yes, but you may need to seek prior approval from the TDI depending on the product's nature and complexity. Texas Law: Consult with the TDI regarding any innovative insurance products or features to ensure they comply with Texas insurance regulations. Q: Where can I find resources to learn more about Texas insurance laws and regulations for P&C insurtech? The Texas Department of Insurance website (https://www.tdi.texas.gov/) offers a wealth of resources, including regulations, licensing information, and consumer guides. Texas Law: Additionally, consider consulting with legal counsel specializing in insurance law for in-depth guidance on Texas P&C insurance regulations and insurtech considerations. Q&A Asked by Question Chiemerie What current level are you on this project? Answer