State RegulationsTX specificDifficulty 3/5
A Texas agent tells a prospect that the prospect's current insurer is about to become insolvent and will not pay claims, in order to persuade him to replace the policy. What does this conduct violate?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under TIC 541.053, a person may not make, publish, or circulate a statement that is false, or that is maliciously critical of or derogatory to an insurer's financial condition, and that is calculated to injure that insurer. Telling a prospect that the existing carrier is about to fail is precisely such a statement. Practical consequence: the agent faces a Chapter 541 enforcement action and license discipline, and the replacement is tainted even if the new policy is objectively better.
Why the other options are wrong
- A) Misrepresentation under Chapter 541 targets misstating the terms or benefits of the policy being sold; an attack on another insurer's financial condition is defamation.
- B) Rebating involves giving value not specified in the policy as an inducement; no inducement of that kind is offered here.
- D) Unfair discrimination concerns differing rates or benefits for insureds of the same class, not statements made about a competitor.
Memory hook
Badmouthing another carrier's solvency is defamation.