The Commissioner of Insurance, by Commissioner's Order No. 96-1495, has approved amendments to Sections 16 and 12.A. of the Plan of Operation of the Texas Automobile Insurance Plan Association (TAIPA), with those amendments becoming effective December 20, 1996. Although a Commissioner's Bulletin is generally not distributed for such orders issued under the Insurance Code, Article 21.81, special emphasis is being given in this instance to the amendment to Section 12.A., to which a new subsection 8, "Take-out Offers," was added, providing as follows:
"8. Take-out Offers
When an insured receives a take-out offer pursuant to Section 17 of this plan of operation and contacts the producer, the producer shall inform the insured of his or her options pursuant to the take-out offer. No producer shall engage in misrepresentation with regard to the contents of the take-out offer letter or the take-out program."
The TAIPA Plan of Operation was previously approved by the Governing Committee of TAIPA, which is a non-profit corporate body operating under the Insurance Code, Article 21.81. When the Commissioner adopts amendments to TAIPA's Plan of Operation under Article 21.81, those provisions become enforceable under the Texas Non-Profit Corporation Act (Texas Civil Statutes, Article 1396-1.01, et seq.). Agents who misrepresent the mandatory take-out offer are subject to automatic suspension of their TAIPA producer certification.
TAIPA has received reports that some agents have misrepresented the take-out plan to induce insureds to retain coverage through TAIPA so that these agents will continue to receive commissions for these assignments. Such action would be illegal for many reasons. As an example, it would be a violation to eliminate the Personal Injury Protection (PIP) and Uninsured Motorist (UIM) coverages from a TAIPA quote to artificially depress the TAIPA premium in comparison to a voluntary market quote including such coverages, absent a clear disclosure of the unequal nature of coverage. Any misrepresentation of the take-out plan may result in TDI disciplinary action against the offending agent. Section 12 (Performance Standards for Producers) of the Plan of Operation provides for Governing Committee referrals of agents' violations to the Commissioner. The Commissioner may take disciplinary action in such cases, and may also do so under statutory authority discussed below, even without a referral from the Governing Committee.
The Insurance Code, Article 21.01-2, Section 5(a) sets forth penalties ( e. g. license revocation or suspension) that are to be imposed upon agents who violate any insurance statute or any rule of the Department of Insurance. Article 21.21, Sections 3 and 4 prohibit unfair methods of competition or unfair and deceptive acts or practices, and those are broadly defined. Section 4(11) also prohibits such misrepresentation, and defines that word broadly, including failure "to disclose any matter required by law to be disclosed...".
Because this letter is directed to agents, it does not attempt to summarize other provisions of Order No. 96-1495, but copies of that order may be obtained from the office of the Chief Clerk.
Elton Bomer
Commissioner Of Insurance