Texas Marketing & Unfair Trade Practices — Texas Insurance Law — Life & Health Practice Test

This Texas Insurance Law — Life & Health Texas Marketing & Unfair Trade Practices practice set has 26 practice questions based on the official exam materials, each with an instant explanation.

Sample questions

Three questions from the Texas Marketing & Unfair Trade Practices bank with the correct answer and an explanation. The practice quiz above draws 26 questions at random from the same bank.

1. Texas's Prompt Payment of Claims law (Tex. Ins. Code Chapter 542) primarily requires insurers to:

   • Acknowledge, investigate, and pay or deny claims within specific statutory time frames, or owe added interest/penalties for unreasonable delay — Correct answer
   • Pay every submitted claim in full regardless of investigation
   • Only process claims that exceed a stated dollar threshold
   • Handle claims only through arbitration, never litigation

   Explanation: Chapter 542 (the Prompt Payment of Claims provisions) sets deadlines for acknowledging, investigating, and resolving claims and imposes added interest/penalty exposure for unreasonable delay. (Tex. Ins. Code §§542.001-.014, .054-.058)

   Handbook: Texas Marketing & Unfair Trade Practices — Claims Methods and Practices

2. Under the Texas Prompt Payment of Claims provisions, once an insurer has received all items reasonably necessary to investigate a claim, the insurer must, within the statutory notice period, do which of the following?

   • Notify the claimant in writing whether the claim is accepted or rejected, and state the reasons for any rejection — Correct answer
   • Wait indefinitely until the claimant follows up
   • Automatically deny the claim to preserve the right to investigate further
   • Refer the claim to TDI for the agency to decide

   Explanation: Tex. Ins. Code §§542.054-.058 require the insurer to give the claimant written notice accepting or rejecting the claim within the statutory period after receiving all reasonably requested information, stating reasons for any rejection.

   Handbook: Texas Marketing & Unfair Trade Practices — Claims Methods and Practices

3. If a Texas insurer fails to pay a claim within the time required by the Prompt Payment of Claims provisions without a reasonable basis for the delay, the insurer is generally liable for:

   • The amount of the claim plus statutory interest on that amount, and potentially reasonable attorney's fees — Correct answer
   • No additional liability beyond the original claim amount
   • Automatic revocation of the insurer's certificate of authority
   • A mandatory doubling of the policy's face amount

   Explanation: Tex. Ins. Code §§542.001-.014, .054-.058 impose added statutory interest, plus potential attorney's fees, when an insurer unreasonably delays paying a valid claim, on top of the claim amount itself.

   Handbook: Texas Marketing & Unfair Trade Practices — Claims Methods and Practices