Ethics and Unfair Practices in Insurance Flashcards

Under DC claims regulations, what constitutes 'unfair claims settlement practices'?

Answer: Denying a claim without a reasonable investigation or without stating the reason for denial

Denying a claim without a reasonable investigation or failing to provide a written reason for denial is an unfair claims settlement practice under DC law.

What is the 'doctrine of utmost good faith' (uberrimae fidei) as applied to DC insurance contracts?

Answer: Both parties must disclose all material facts relevant to the insurance contract, even without being asked

Uberrimae fidei requires both the insured and insurer to disclose all material facts—even those not specifically requested—because insurance contracts are based on trust.

A DC insurer consistently denies valid claims to boost profits. This pattern could expose the insurer to which legal action beyond regulatory fines?

Answer: A bad faith lawsuit with potential punitive damages

Insurers who engage in a pattern of bad faith claims denial can face civil lawsuits from policyholders seeking compensatory and punitive damages beyond the policy limits.

Which DC insurance regulation specifically prohibits an insurer from canceling a policy based solely on the policyholder's credit score after a mid-term cancellation moratorium applies?

Answer: Anti-discrimination statute prohibiting credit-based insurance scoring after policy inception

DC's anti-discrimination and insurance regulations restrict use of credit-based insurance scoring, particularly for mid-term cancellations once a policy is established.

What must a DC producer do when a client makes a material change in their circumstances (e.g., a significant property renovation) that could affect their coverage?

Answer: Notify the insurer and update the policy to reflect the changed exposure

A producer has a duty to inform the insurer of material changes and ensure the policy is updated to reflect the insured's actual exposure.

Under DC's unfair trade practices act, which action by a DC insurer is explicitly prohibited regarding claim payments?

Answer: Compelling policyholders to litigate by offering substantially less than a reasonable claim amount

Compelling policyholders to litigate by offering substantially less than claims are worth is a prohibited unfair claims practice under DC law.