Texas Insurance Regulations: The Complete Guide for Insurance Professionals

Texas insurance regulations fall under the Texas Department of Insurance (TDI), which oversees the second-largest insurance market in the United States. Texas generated $142 billion in total insurance premium in 2025 across all lines. TDI regulates over 2,800 insurance companies and 520,000+ licensed insurance producers. Texas uses a file-and-use rate system for most personal lines and a prior-approval system for workers' compensation. This texas insurance regulations guide covers the regulatory framework from licensing through enforcement, with the specific statutes and penalty structures every insurance professional needs to know.

Key Takeaways

• Texas requires separate licensing for each line of authority (General Lines P&C, Life/Health, Personal Lines), with no combined exam option; as of 2025, TDI has issued licenses to 524,000+ active insurance professionals in the state, per the TDI 2025 Annual Report
• TDI's market conduct division opened 1,214 market conduct actions in 2025, with the leading violations being unfair claims settlement practices (38%), misrepresentation (22%), and premium handling violations (19%), per the TDI 2025 Market Conduct Report
• Workers compensation in Texas is unique: private employers are not required to carry workers comp (Texas is the only non-compulsory WC state), but non-subscribers face full common law liability for workplace injuries; 72% of Texas private employers carry voluntary WC as of 2025
• Texas surplus lines transactions must be filed with the Surplus Lines Stamping Office of Texas (SLSOT) within 60 days of binding; the surplus lines tax is 4.85% (3.5% state + 1.35% stamping fee) on all eligible placements
• Texas Insurance Code Chapter 541 (unfair claims practices) and Chapter 542 (prompt payment) impose specific claim handling timelines: acknowledgment within 15 days, accept/deny within 15 days of all items requested, and payment within 5 days of settlement agreement
• TDI's enforcement authority includes license revocation, fines up to $25,000 per violation per day, and restitution orders; in 2025, TDI collected $18.4 million in fines and restitution, a 12% increase from 2024

Texas Insurance Licensing Requirements

Texas requires a separate license for each line of authority an individual or business entity sells. There is no umbrella license that covers all lines.

Available lines of authority in Texas:

• General Lines Property and Casualty (Agent)
• Life, Accident, Health and HMO
• Personal Lines Property and Casualty
• Title Insurance
• Surplus Lines (requires active P&C license as prerequisite)
• Life Settlement
• Public Insurance Adjuster

Pre-Licensing Education and Examination

Before applying for a license, Texas requires completion of pre-licensing education hours:

• General Lines P&C: 40 hours
• Life, Accident, and Health: 40 hours
• Personal Lines: 20 hours

Examinations are administered by Pearson VUE under contract with TDI. The General Lines P&C exam covers property, casualty, and all related commercial topics. Passing score is 70%.

After passing the exam, submit the license application through NIPR or directly to TDI. Texas conducts a background check for each applicant. Criminal convictions do not automatically bar licensure but require additional review. Certain felonies (fraud, theft, dishonesty) result in automatic denial under Texas Insurance Code Section 4003.

Business Entity Licensing

Corporations, LLCs, and partnerships transacting insurance in Texas must hold a business entity license in addition to individual producer licenses. Each entity must designate a licensed designated responsible licensee (DRL).

The DRL is responsible for the entity's compliance. If the DRL's individual license lapses or is revoked, the entity license becomes inactive. Replace a departing DRL within 30 days.

Non-resident agencies placing business on Texas risks must hold a Texas non-resident business entity license. Each individual producer at a non-resident agency who services Texas accounts needs a Texas non-resident individual license.

Continuing Education Requirements

Texas requires 24 hours of continuing education every 2 years for licensed producers. Requirements include:

• 3 hours of ethics
• Remaining hours from TDI-approved courses in the licensee's lines of authority

Agents with life/health licenses must complete CE that includes long-term care topics in at least one of every two license periods.

TDI does not automatically notify agents when CE requirements are approaching. Agents are responsible for tracking their own CE compliance. License renewals are submitted to TDI biennially; CE must be complete before renewal.

Failure to complete CE before the renewal deadline results in license lapse. Reinstating a lapsed license requires completing the CE requirement, paying a reinstatement fee ($50-$200 depending on license type), and confirming there are no pending enforcement actions.

Texas Rate Regulation

Texas uses a file-and-use system for most property and casualty lines. Under file-and-use, insurers may implement rate changes immediately upon filing with TDI, without waiting for approval. TDI reviews filings after implementation and can require rollback of non-compliant rates.

Prior approval lines: Workers compensation rates require TDI prior approval before implementation. This is a more restrictive standard that requires affirmative approval before the rate takes effect.

Competitive market: Texas Mutual Insurance Company (the state's largest WC carrier) and private WC carriers compete for accounts. The prior approval requirement for WC rates means TDI actively manages rate levels to maintain market stability.

Rate Filing Compliance for Agencies

While agencies do not file rates directly, agents have indirect compliance obligations:

• Applying non-filed or non-approved rates violates Texas Insurance Code Section 2251.101
• Using carrier rating worksheets that do not match the filed rate is a market conduct violation
• Binding coverage at rates the carrier has not filed is a violation even if the carrier instructed the agent to do so

If a carrier's underwriter quotes a rate that differs from the filed rate, get written confirmation that the quote reflects the correct filed rate before binding. Agents who bind at undisclosed or non-filed rates share regulatory exposure with the carrier.

Workers Compensation in Texas: The Non-Subscriber System

Texas is the only state in the U.S. where private employers are not required to carry workers compensation insurance. Employers who choose not to purchase WC are called "non-subscribers."

Non-subscriber consequences: Non-subscribing employers cannot use the exclusive remedy defense that WC provides. An injured employee of a non-subscriber can sue the employer under common law negligence, with the employer unable to raise the defenses of contributory negligence, fellow servant negligence, or assumption of risk. This creates significantly higher liability exposure than standard WC claims.

The Texas WC market: 72% of private Texas employers voluntarily purchase workers compensation despite it not being required. Large employers in high-injury industries (construction, manufacturing, healthcare) purchase WC because the exclusive remedy defense is worth more than the premium cost.

Certificates of Insurance for Texas WC

When a Texas employer carries WC voluntarily, they obtain an ACORD 25 certificate like any other state. The certificate confirms coverage under the voluntary WC policy.

When a Texas employer is a non-subscriber, they cannot provide a WC certificate. Some non-subscribers purchase an Employers Liability-only policy or an ERISA-governed occupational accident plan as an alternative. These are not WC policies and do not provide the same protections for the employer or the employee.

Brokers handling Texas construction accounts must verify whether subcontractors are WC subscribers or non-subscribers. A non-subscriber subcontractor creates an uninsured injury exposure that can become the GC's liability.

Texas Surplus Lines Regulations

Texas has the second-largest surplus lines market in the U.S. (after California) with $21.4 billion in non-admitted premium in 2025. Texas has strict surplus lines compliance requirements.

Eligibility Requirements

To place business on a surplus lines basis in Texas:

1. The risk must be eligible: placed only after a diligent effort to place with admitted carriers
2. The insurer must be on TDI's List of Eligible Non-Admitted Insurers
3. The placing agent must hold a Texas surplus lines license

The diligent effort requirement: the surplus lines agent must make a documented effort to place the risk with at least three admitted carriers before accessing the non-admitted market. Declination evidence must be documented and retained.

SLSOT Filing and Tax Requirements

Every surplus lines transaction must be reported to the Surplus Lines Stamping Office of Texas (SLSOT) within 60 days of binding. SLSOT collects a stamping fee and reviews transactions for compliance.

Texas surplus lines tax rate: 4.85% total (3.5% state tax + 1.35% SLSOT stamping fee) on gross premium including policy fees.

Tax due: surplus lines agents file quarterly tax returns with TDI. Taxes must be collected from the insured and remitted to TDI. Failure to collect or remit surplus lines taxes results in personal liability for the agent.

SLSOT compliance violations result in fines up to $25,000 per day per violation. TDI has revoked surplus lines licenses for repeated SLSOT filing failures.

Texas Prompt Payment Laws

Texas Insurance Code Chapter 542 (the Prompt Payment of Claims Act) is one of the strictest claim payment laws in any state. Violations carry automatic statutory damages plus interest.

Timelines under Chapter 542:

• Acknowledgment of claim: within 15 calendar days of receipt
• Acceptance or denial: within 15 business days after receiving all requested items
• Payment of accepted claim: within 5 business days of settlement agreement

If TDI claims are paid late, the insurer owes interest at 18% per annum plus attorney fees. For an insurer that delays a $100,000 claim payment by 60 days beyond the required deadline, the statutory penalty adds $2,959 in interest and potentially more in attorney fees.

Agency obligations under Chapter 542: Agencies that handle claims directly (MGAs with claims authority) must comply with these timelines. Retail agencies that process claims through carriers are expected to facilitate timely communication. Documenting when you forwarded claims information to the carrier protects the agency if a prompt payment dispute arises.

Market Conduct and Unfair Trade Practices

Texas Insurance Code Chapter 541 prohibits unfair or deceptive acts in the business of insurance. Key prohibited practices:

• Misrepresenting policy terms or benefits
• Making false statements about a competitor's financial condition
• Inducing policy replacement through misrepresentation
• Twisting (using misleading comparisons to induce replacement of existing coverage)
• Rebating (offering anything of value as an inducement to purchase insurance, beyond what is permitted under Texas law)
• Churning (replacing insurance for the benefit of the agent rather than the client)

Chapter 541 violations carry civil penalties up to $25,000 per violation. Intentional violations carry penalties up to $25,000 per day per violation. TDI also has authority to seek restitution for actual harm to consumers.

Rebating Rules in Texas

Texas generally prohibits rebating (giving anything of value as an inducement to purchase insurance). This includes cash rebates, excessive gifts, and anything beyond nominal advertising items.

Texas enacted a rebating reform (effective 2024) that allows agents to offer limited rebates up to $25 per policy period and educational tools valued up to $100 annually. The reform aligns Texas with states that have moved away from strict anti-rebating rules.

Verify current TDI guidance on rebating before implementing any client incentive program. The rules remain complex and violations are enforced actively.

Texas Privacy and Data Security Requirements

Texas enacted the Texas Data Privacy and Security Act (TDPSA) in 2023, effective July 2024. It applies to businesses that process personal data of Texas residents and meet certain revenue or data volume thresholds.

TDPSA requirements relevant to insurance agencies:

• Provide a privacy notice disclosing data collection and use practices
• Respond to consumer data access, deletion, and correction requests within 45 days
• Conduct data protection assessments for high-risk processing activities
• Maintain reasonable security practices for personal data

TDPSA is enforced by the Texas Attorney General. There is no private right of action. Penalties can reach $7,500 per intentional violation.

The Texas Department of Insurance also requires that agencies follow the NAIC Insurance Data Security Model Law, which Texas adopted in 2021 (effective 2022). The NAIC model requires a written cybersecurity program, annual risk assessments, and incident response plans for licensed insurers and producers.

License Renewal and Reinstatement

Texas producer licenses renew biennially. The renewal deadline is the last day of the licensee's birth month in even or odd years (based on initial license date).

TDI sends renewal notices but agents are responsible for meeting the deadline. Renewals more than 30 days overdue require reinstatement rather than renewal. Reinstated licenses after 1 year of lapse require re-examination.

For business entities, the entity license renews separately from individual producers. Track both renewal dates.

Frequently Asked Questions

Do Texas insurance agents need separate licenses for commercial and personal lines?

Texas offers a General Lines P&C license that covers all property and casualty lines, including both commercial and personal. You do not need separate commercial and personal lines licenses for P&C. However, if you want to sell Personal Lines only (auto and homeowners for individuals), you can obtain a Personal Lines license instead of the full General Lines license. The Personal Lines license has lower pre-licensing education requirements but cannot be used to write commercial lines accounts.

What are the consequences for placing business with a non-admitted carrier not on TDI's eligible insurer list?

Placing business with an unlicensed, non-admitted carrier (not on TDI's eligible list) violates Texas Insurance Code Section 101.051. Penalties include fines up to $25,000 per violation, license suspension, and personal liability for any claims the unlicensed carrier fails to pay. The insured has no state guaranty fund protection if the carrier becomes insolvent. Always verify carrier eligibility through TDI's website before placement.

Is Texas a compulsory workers compensation state?

No. Texas is the only state in the U.S. where private employers are not required to purchase workers compensation insurance. Employers who opt out are called non-subscribers. Non-subscribers lose the exclusive remedy protection that WC provides, exposing them to full common law liability for worker injuries. Non-subscribers must file a notice of non-subscription with TDI. Most commercial contracts require subcontractors to maintain WC; verify whether your construction clients' subcontractors are subscribers before accepting certificates.

How do Texas prompt payment rules affect insurance agencies that handle claims?

Agencies with binding or claims authority must comply with Chapter 542 timelines. Retail agencies acting only as intermediaries between clients and carriers must document every claim-related communication with timestamped records. If a client argues that the agency caused a delayed payment by sitting on claim documentation, the agency's records either confirm or undermine that argument. Build a claims documentation workflow that automatically timestamps every action from FNOL through carrier submission.

What continuing education is required for Texas surplus lines brokers?

Texas surplus lines brokers are subject to the same 24-hour CE requirement as all other licensed producers, plus they must complete CE specific to surplus lines topics in at least one course per renewal period. TDI does not require specific surplus lines CE hours beyond the general 24-hour requirement, but staying current on SLSOT filing requirements and eligible insurer list changes is a professional obligation. Review TDI's surplus lines bulletins at least quarterly.

How does Texas regulate the use of credit scoring in insurance?

Texas Insurance Code Chapter 559 regulates the use of credit information in personal lines insurance (homeowners and auto). Insurers may use credit scoring as a rating factor but must comply with specific disclosure requirements when an adverse action is taken based on credit. Adverse action includes denial, non-renewal, cancellation, or charging a higher premium based on credit information. Insurers must provide consumers with the specific credit information used and offer an opportunity to dispute inaccurate information.

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Written by Javier Sanz, Founder of BrokerageAudit. Last updated April 2026.