Indiana State Life and Health Insurance Practice Exam

An example of an Unfair Claims Settlement Practice would be?

1. Requesting a third-party arbitrator to resolve a disagreement

2. Paying a claim promptly after receiving proof of loss

3. Misrepresenting insurance policy provisions affecting a loss

4. Requiring the insured to give a statement under oath

The correct answer is: Misrepresenting insurance policy provisions affecting a loss

Misrepresenting insurance policy provisions affecting a loss constitutes an Unfair Claims Settlement Practice because it undermines the integrity of the claims process. When an insurer misrepresents the terms or conditions of a policy, it can lead to confusion or misinformation for the insured, possibly resulting in a denial of a legitimate claim or inadequate settlement. This practice is detrimental not only to the policyholder but also to the insurance market as it decreases trust and transparency. In the context of fair dealings, insurance companies must clearly communicate policy details and claim provisions to their clients. Misrepresentation violates regulatory standards aimed at ensuring fair treatment of policyholders. This is why it is crucial for insurers to accurately represent policy provisions and act in good faith when settling claims.