- The ultimate function and purpose of the Unfair Claims Practices Act is to ensure that an insurance company settle claims in a fair and honest manner, avoiding certain deceptive practices defined in the act. Under the law, isolated instances of bad dealing with consumers do not rise to the level of unfair claims settlement practices.
- The Unfair Claims Practices Act is significant legislation because it allows a state insurance regulator to intercede directly on behalf of consumers who are victims of inappropriate claim settlement practices. Moreover, the act permits an insurance commissioner to penalize an insurance company through fines and a cease and desist order. The insurance commissioner monitors the claims settlement practices of an insurance company after a violation of this law.
- One prime example of an unfair claims settlement practice is providing a consumer with false or misleading information about the content and coverage of an insurance policy. Understanding that insurance policy provisions by their very nature are complex and oftentimes confusing, an insurer is prohibited from taking advantage of this reality by providing inaccurate information about these terms.
- An insurance company has the duty under the law to investigate all claims in a timely manner. Although the law does not set forth specific time frames for the investigation of every claim (because facts and circumstances do differ from case to case), the statute does not tolerate any unnecessary or intentional delay that works to the disadvantage of an insured consumer.
- As the title of the law makes clear, an insurance company has the legal obligation to satisfy legitimate claims in a timely manner. Once liability and the extent of damages are established, an insurance company must make an appropriate payment on the claim to the consumer. The time frame for claim payment in each state does vary. However, when a determination of liability and damages is made, the period of time in which a settlement payment is to be conveyed to a consumer is a matter of days--not weeks or months.
- A consumer who believes that she is being subjected to any type of unfair claims settlement practice (or any other type of violation of the law or inappropriate business practice) by an insurance company, agent, broker or claims representative should contact the insurance commissioner in her state. The contact information for the insurance commissioner in any given state can be obtained by telephoning the National Association of Insurance Commissioners at 816-842-3600.
