CCP Legal Compliance & Regulatory Standards 2 — Questions and Answers
Question 1: Under the Unfair Claims Settlement Practices Act (UCSPA), which action constitutes a prohibited practice?
- Acknowledging receipt of a claim within 10 days
- Denying a claim without conducting a reasonable investigation (Correct answer)
- Offering a settlement within 30 days of proof of loss
- Requesting medical records relevant to the claim
Correct answer: Denying a claim without conducting a reasonable investigation
Denying claims without a reasonable investigation is a prohibited unfair claims settlement practice under the UCSPA.
Question 2: The McCarran-Ferguson Act of 1945 primarily established that:
- Federal law governs all insurance regulations nationwide
- States have primary authority to regulate the insurance industry (Correct answer)
- The NAIC sets binding rules for all insurers
- Congress must approve all state insurance statutes
Correct answer: States have primary authority to regulate the insurance industry
McCarran-Ferguson reaffirmed state regulation of insurance by exempting insurers from federal antitrust laws as long as the state regulates the activity.
Question 3: A claims adjuster fails to respond to a claimant's inquiry within the timeframe required by state law. This most likely violates:
- ERISA Section 502
- Prompt Payment statutes (Correct answer)
- The Gramm-Leach-Bliley Act
- HIPAA Privacy Rule
Correct answer: Prompt Payment statutes
Prompt Payment statutes require insurers to acknowledge, investigate, and respond to claims within specified timeframes.
Question 4: Which federal law imposes requirements on group health plan claims procedures, including specific timelines for benefit determinations?
- UCSPA
- ERISA (Correct answer)
- McCarran-Ferguson Act
- FCRA
Correct answer: ERISA
ERISA establishes minimum standards for benefit claims procedures in employer-sponsored group health plans, including mandatory timeframes.
Question 5: When an insurer discovers evidence of insurance fraud during a claim investigation, most states require the insurer to:
- Immediately deny the claim without further action
- Report the suspected fraud to the state's insurance fraud bureau (Correct answer)
- Settle the claim at a reduced amount as a compromise
- Refer the matter solely to the insurer's legal department
Correct answer: Report the suspected fraud to the state's insurance fraud bureau
Most states mandate that insurers report suspected fraud to the state's insurance fraud bureau or department.
Question 6: Under the Gramm-Leach-Bliley Act (GLBA), insurers must provide customers with a privacy notice:
- Only when a claim is filed
- At the time a policy is issued and annually thereafter (Correct answer)
- Upon request by the policyholder only
- Every five years during the policy period
Correct answer: At the time a policy is issued and annually thereafter
GLBA requires financial institutions, including insurers, to provide privacy notices at account opening and annually.
Question 7: A claimant submits a claim under a policy subject to ERISA. The plan administrator denies the claim. Under ERISA, the claimant must first:
- File a lawsuit in federal court immediately
- Exhaust the plan's internal appeal process (Correct answer)
- Submit the dispute to state arbitration
- File a complaint with the state insurance department
Correct answer: Exhaust the plan's internal appeal process
ERISA requires claimants to exhaust the plan's internal administrative appeals before pursuing litigation.
CCP Legal Compliance & Regulatory Standards 2
Under the Unfair Claims Settlement Practices Act (UCSPA), which action constitutes a prohibited practice?