North Carolina Adjuster Practice Exam

Which of the following scenarios is an example of an Unfair Claims Settlement Practice?

1. Paying a claim promptly after review

2. Failure to make an adequate investigation before denying a claim

3. Consulting with policyholders regarding their claims

4. Providing clear explanations for claims process

The correct answer is: Failure to make an adequate investigation before denying a claim

The scenario of failing to conduct an adequate investigation before denying a claim exemplifies an Unfair Claims Settlement Practice because it reflects a lack of due diligence on the insurer's part. In the insurance industry, companies are required to investigate claims thoroughly and fairly assess the validity of claims based on the available evidence. When an insurer denies a claim without a comprehensive investigation, it not only violates principles of fair dealing but could also lead to wrongful denials, causing undue stress and financial hardship for the policyholder. Timely claims processing and clear communication with policyholders are expected best practices. Paying a claim promptly after review and consulting with policyholders indicates a commitment to good service and adheres to industry standards. Additionally, providing clear explanations of the claims process ensures that policyholders understand what to expect, fostering trust and transparency. In contrast, inadequate investigations undermine the integrity of the claims process, highlighting the importance of thoroughness and fairness in evaluating claims.