Should surplus lines policies include notice to insureds regarding their status?

Surplus lines policies must include a notice to insureds regarding their status because it is a regulatory requirement stemming from the need for transparency in the insurance market. This notification informs the insured that the insurer is not licensed in Texas and that the policy may not be subject to the same regulatory protections as traditional policies. This information is essential because it helps the insured to understand the risks associated with surplus lines insurance, which is typically used when coverage cannot be obtained through admitted carriers. By including this notice, the insurer ensures that consumers are aware of the unique characteristics and potential implications of their coverage, such as the lack of certain consumer protections typically provided by state regulators. This practice upholds the principles of fair disclosure and informed consent in the insurance process, which are crucial for consumer protection.