Dual Compensation – Hide & Seek
Many Texas political subdivisions employ licensed fee based insurance consultants to assist in the competitive procurement of insurance and on-going risk management advice. The Texas Department of Insurance issues two licenses required to act as a fee based insurance consultant in this state.
A Life & Health Insurance Counselor license and Risk Manager license are both required to perform certain services in the acts of a fee based insurance consultant, although there are certain exceptions to licensing. http://www.statutes.legis.state.tx.us/Docs/IN/htm/IN.4052.htm#4052.001 http://www.statutes.legis.state.tx.us/Docs/IN/htm/IN.4153.htm#4153.001
The type of risks which are evaluated by a Life & Health Counselor includes health insurance while the type of risk evaluated by a Risk Manager are of a property and casualty nature. However, health insurance is a casualty insurance coverage as well as one offered by life insurers. As an example, many types of medical stop loss insurance coverages are casualty products and not by definition health insurance cover.
The services offered by a Risk Manager, while related to property-casualty risks are not limited to the kinds and amounts of this type of insurance to be carried, although existing insurance programs may properly be analyzed and recommendations made. An equally important service related to a Risk Manager license is in the area of risk reduction or elimination.
The Texas Department of Insurance has recently cautioned insurance agents that Insurance Code 4005.054 and 4052.055 and 28 Texas Administration Code 19.1318 contain prohibitions against licensed persons accepting dual compensation for acting as both an insurance agent and Life & Health Counselor or Risk Manager for the same service provided to the same client.
The statutory penalties for acting as an unlicensed insurance consultant in this state is a criminal penalty and an offense that is a felony of the third degree (Article 1.14-1- Unauthorized Insurance, Texas Insurance Code).
Editor’s Note: Prohibition of dual compensation is a valid concern for many political subdivisions who contemplate hiring an insurance consultant. For good reason. There is one method to protect against this which we learned from a retired Texas State Representative and now practicing attorney.
Hide & Seek – Never, ever write an email you dont want the competition to see
Lawsuit Accuses Houston ISD Insurance Consultant of Conning District: http://texasedequity.blogspot.com/2005/03/lawsuit-accuses-hisd-insurance.html
http://www.thefowlerlawfirm.com/newsletter/schools/061008.html Required Reading for Purchasing Managers!