The Texas Department of Insurance (“TDI”) has issued a warning about certain unauthorized insurance and the liability that can attach to third-party administrators (“TPAs”) and insurance agents that are involved in unauthorized insurance transactions, even when those parties hold valid TDI licenses. TDI issued Commissioner’s Bulletin No. B-0007-19 (the “Bulletin”), which noted that unlicensed and unauthorized companies are marketing health insurance or insurance-like products to Texas consumers. Specifically referenced by TDI in the Bulletin were unidentified companies claiming to be health care sharing ministries or other health benefits innovative businesses which may not comply with Texas law insurance regulatory exemptions. The Bulletin serves as a reminder that under Texas Insurance Code Chapter 101, insurance agents and TPAs that assist, directly or indirectly, in the procurement of an unauthorized insurance contract: (1) may be held strictly liable to the insured for the full amount of a claim or loss under such contract if the unauthorized insurer fails to pay the claim or loss; (2) may be subject to civil penalties of up to $10,000 for each act of violation and for each day of violation (arguably even if the insurance agent or TPA did not know that the product was unauthorized); and (3) may have their license suspended or revoked.
While not discussed in the Bulletin, Texas Insurance Code Chapter 101 also imposes a duty to report certain unauthorized insurance activity and makes certain violations of Chapter 101 a criminal offense. See Tex. Ins. Code §101.301 (“A person investigating or adjusting a loss or claim on a subject of insurance in this state shall immediately report to the department an insurance policy or contract that has been entered into by an insurer that is not authorized to transact the insurance in this state.”); Tex. Ins. Code § 101.106 (“A person, including an insurer, who intentionally, knowingly, or recklessly violates Section 101.102 commits an offense . . . An offense under this section is a felony of the third degree.”).
TDI recommends that all insurance agents and TPAs carefully evaluate all new health benefits related products and companies, including, but not limited to, verifying a company’s license on the National Association of Insurance Commissions website. To see a copy of the Bulletin, click here.