Texas Insurance Code 4005.004 – Disclosure of Compensation
(a) In this section:
(1) “Affiliate” has the meaning described by Section 823.003(a).
(2) “Agent” means a person licensed under Chapter 4051, 4053, 4054, or 4056.
(3) “Compensation from an insurer or other third party” includes payments, commissions, fees, awards, overrides, bonuses, contingent commissions, loans, stock options, gifts, prizes, or any other form of valuable consideration, whether or not payable under a written contract or agreement.
(4) “Compensation from a customer” does not include a fee described by Section 4005.003, an application fee, or an inspection fee.
(5) “Customer” means the person signing the application for insurance or the authorized representative of the insured actually negotiating the placement of an insurance product with the agent. A person is not to be considered a “customer” of an agent for purposes of this section solely because the person is a participant or beneficiary:
(A) of an employee benefit plan; or
(B) of, or otherwise covered by, a group or blanket insurance policy or group annuity contract sold, solicited, or negotiated by an agent or the agent’s affiliate.
(6) “Documented acknowledgment” means a customer’s dated acknowledgment, obtained before the customer’s purchase of an insurance product, as demonstrated by the customer’s written or electronic signature or recorded voice, or by other additional methods that the commissioner may authorize by rule.
(b) If an agent, or any affiliate of an agent, receives compensation from a customer for the placement or renewal of an insurance product, other than a service fee described under Section 4005.003, an application fee, or an inspection fee, the agent or the affiliate may not accept or receive any compensation from an insurer or other third party for that placement or renewal unless the agent has, before the customer’s purchase of insurance:
(1) obtained the customer’s documented acknowledgment that the compensation will be received by the agent or affiliate; and
(2) provided a description of the method and factors used to compute the compensation to be received from the insurer or other third party for that placement.
Terms Used In Texas Insurance Code 4005.004
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Contract: A legal written agreement that becomes binding when signed.
- Person: includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. See Texas Government Code 311.005
- Rule: includes regulation. See Texas Government Code 311.005
- Signature: includes the mark of a person unable to write, and "subscribe" includes the making of such a mark. See Texas Government Code 312.011
- Written: includes any representation of words, letters, symbols, or figures. See Texas Government Code 311.005
(c) This section does not apply to:
(1) a licensed agent who acts only as an intermediary between an insurer and the customer’s agent, including a managing general agent;
(2) a reinsurance intermediary or surplus lines agent placing reinsurance or surplus lines insurance; or
(3) an agent whose sole compensation for the placement or servicing of an insurance product is derived from commissions, salaries, and other remuneration paid by the insurer.
(d) An agent may satisfy any requirements imposed by this section through an affiliate.
(e) The commissioner may adopt rules as necessary to implement the disclosure and acknowledgment of disclosure requirements under this section.