Key Takeaways
- The Texas Insurance Code prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is prohibited in Texas with no exceptions
- Twisting and churning are prohibited practices subject to license revocation and fines
- Texas requires claims to be acknowledged within 15 days and paid within 5 business days of settlement
- Unfair discrimination in underwriting is prohibited except for actuarially justified factors
Last updated: January 2026
Unfair Trade Practices
The Texas Insurance Code prohibits various unfair or deceptive practices in the P&C insurance industry.
Misrepresentation
Producers and insurers are prohibited from:
False Statements
- Making false statements about policy terms or benefits
- Misrepresenting the financial condition of an insurer
- Using misleading policy illustrations
- Making false statements about competitors
- Misrepresenting the nature of insurance transactions
Examples of Misrepresentation
| Prohibited Statement | Why It's Misrepresentation |
|---|---|
| "This policy covers everything" | No policy covers all losses |
| "Your rates will never increase" | Rates can and do change |
| "This is the only policy you need" | May not be true |
| "You must buy today or lose rate" | False urgency |
| "TWIA coverage is the same as regular" | Coverage differs |
False Advertising
Texas prohibits deceptive insurance advertising:
- Ads must be truthful and not misleading
- Must clearly identify as insurance advertisement
- Cannot use testimonials that are not genuine
- Cannot imply government endorsement
- Must include insurer's name
- Cannot guarantee claims payment beyond policy terms
Rebating
Rebating is offering inducements not specified in the policy:
Prohibited (No Exceptions in Texas)
- Returning part of premium to insured
- Offering gifts of substantial value
- Paying for referrals
- Sharing commission with non-licensed persons
- Any valuable consideration not in the contract
Exam Tip: Texas has NO rebating exceptions. Unlike some states, even small gifts are technically prohibited.
Not Rebating
- Premium financing arrangements
- Legitimate filed discounts
- Dividends specified in policy
Twisting and Churning
Twisting
Making misrepresentations to induce replacement:
- Falsely claiming existing policy is inadequate
- Misrepresenting policy values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Excessive replacement of policies to generate commissions:
- Multiple replacements for same client
- Pattern of replacements in book of business
- Ignoring client's best interests
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning to suspension |
| Per violation | Up to $25,000 fine |
| Pattern of violations | License revocation |
| Consumer harm | Restitution required |
Unfair Claims Practices
Texas has specific claims handling requirements:
Claims Timeline Requirements
| Action | Timeframe |
|---|---|
| Acknowledge claim | 15 days |
| Begin investigation | Upon receipt |
| Accept or deny claim | 15 business days after all info received |
| Pay claims | 5 business days after settlement |
Prohibited Claims Practices
- Misrepresenting policy provisions to claimants
- Failing to acknowledge claims promptly
- Failing to communicate claim decisions
- Denying claims without reasonable investigation
- Offering substantially less than reasonable value
- Delaying payment to force settlement
- Not attempting good faith settlement when liability clear
Unfair Discrimination
Texas prohibits unfair discrimination in P&C insurance:
Prohibited Factors
Cannot discriminate based on:
- Race
- Color
- Religion
- National origin
- Age (with exceptions)
- Gender (with actuarial exceptions)
Permitted Underwriting Factors
- Driving record
- Claims history
- Credit score (with disclosures)
- Territory
- Years of experience
Test Your Knowledge
Within how many days must a Texas insurer acknowledge receipt of a P&C claim?
A
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D
Test Your Knowledge
Within how many business days must a Texas insurer pay a settled P&C claim?
A
B
C
D