CCP State Insurance Regulations 2 — Questions and Answers
Question 1: Under most state insurance regulations, what is the maximum number of days an insurer has to acknowledge receipt of a claim after notification?
- 5 business days
- 10 business days (Correct answer)
- 15 calendar days
- 30 calendar days
Correct answer: 10 business days
Most state regulations require insurers to acknowledge receipt of a claim within 10 business days of notification.
Question 2: Which state regulatory body is primarily responsible for overseeing insurer claims handling practices?
- State Attorney General's office
- State Department of Insurance (Correct answer)
- Federal Insurance Office
- National Association of Insurance Commissioners
Correct answer: State Department of Insurance
The State Department of Insurance (or equivalent) has primary regulatory authority over insurer claims handling within each state.
Question 3: A state's Unfair Claims Settlement Practices Act (UCSPA) prohibits insurers from doing which of the following?
- Denying claims that lack supporting documentation
- Conducting thorough investigations before paying claims
- Failing to promptly settle claims where liability is clear (Correct answer)
- Requiring claimants to submit sworn proofs of loss
Correct answer: Failing to promptly settle claims where liability is clear
UCSPA prohibits insurers from failing to promptly settle claims in which liability has become reasonably clear.
Question 4: What does the term 'reservation of rights' mean in the context of state insurance regulations?
- The insurer reserves money for future claim payments
- The insurer investigates while preserving its right to deny coverage later (Correct answer)
- The claimant reserves the right to sue after denial
- The state reserves the right to audit the insurer
Correct answer: The insurer investigates while preserving its right to deny coverage later
A reservation of rights letter notifies the insured that the insurer is investigating the claim while preserving its right to deny coverage if a policy exclusion applies.
Question 5: Under state bad faith laws, which element does a claimant typically NOT need to prove to establish insurer bad faith?
- The insurer denied or delayed a valid claim
- The insurer lacked a reasonable basis for its actions
- The insurer intended to commit fraud (Correct answer)
- The denial or delay caused damages to the claimant
Correct answer: The insurer intended to commit fraud
Most state bad faith claims do not require proof of intentional fraud; an unreasonable basis for denial or delay is typically sufficient.
Question 6: Which of the following is a typical requirement under state prompt payment statutes for personal lines property claims?
- Payment within 5 days of proof of loss
- Acceptance or denial within 15 days of proof of loss
- Settlement within 45 days of proof of loss (Correct answer)
- Appraisal within 60 days of proof of loss
Correct answer: Settlement within 45 days of proof of loss
Many states require insurers to accept or deny a claim and issue payment within 45 days of receiving proof of loss for property claims.
Question 7: When a state requires an insurer to provide a 'written explanation of denial,' what must this document contain?
- Only the policy section number that applies
- The specific reasons for denial and the relevant policy provisions (Correct answer)
- A list of all exclusions in the policy
- The claimant's options for arbitration only
Correct answer: The specific reasons for denial and the relevant policy provisions
A denial letter must cite the specific reasons for denial and reference the applicable policy language or exclusions supporting the decision.
CCP State Insurance Regulations 2
Under most state insurance regulations, what is the maximum number of days an insurer has to acknowledge receipt of a claim after notification?