Insurance claims handling

Before diving into the rules, let’s clarify a few key terms:

• Claimant (§2695.2(c)) - Any person making a claim. This can be the insured, a beneficiary, or a third party.
• Notice of legal action (§2695.2(o)) - A written notice that a lawsuit has been filed in connection with a claim.
• Proof of claim (§2695.2(s)) - Written evidence that supports the occurrence of a loss, the amount of the claim, and the claimant’s right to benefits.

You can think of these as the “building blocks” used throughout the claims process.

File and record documentation

Insurers must document each step of the claim-handling process. Specifically, they must:

• Maintain claim files in a way that regulators can easily review for compliance.
• Keep all claim records for at least five years.
• Include documentation of all communications, transactions, and actions taken on the claim.
• Proper documentation creates a clear paper trail for accountability and transparency. If regulators audit a claim, the insurer must be able to show what was done and when.

Duties upon receiving communications

When an insurer (or its agents) receives any communication about a claim, it must respond promptly:

• Acknowledge receipt within 15 calendar days.
  • Provide forms, instructions, and any assistance needed to move the claim forward, also within 15 days.
• Respond to claimant inquiries or questions from the claimant’s representatives within 15 days.

These requirements help prevent unnecessary delays and keep the claimant informed.

Standards for prompt, fair, and equitable settlements

Insurers have specific timelines and duties for investigating and resolving claims:

Investigations

• Must begin immediately, and no later than 15 days after receiving notice of a claim.

Decisions

• Accept or deny the claim within 40 days of receiving proof of claim.
• If more time is needed, provide a written explanation for the delay.

Payments

• If the claim is accepted, payment must be issued within 30 days, unless another arrangement is agreed upon.

Denials

• If the claim is denied, the denial must be in writing and must clearly state all reasons for denial.

Prohibited practices

Insurers must not:

• Misrepresent facts or policy provisions.
• Delay payment without a valid reason.
• Request unnecessary or repetitive information from claimants.

These rules are designed to ensure claims are handled fairly, promptly, and transparently.

Example question

Maria is rear-ended at a stoplight and files an auto claim against the other driver’s insurer. She emails the insurer a detailed description of the accident and asks how to proceed. Ten days later, she still hasn’t received any reply, forms, or instructions.

Under California’s claims regulations, has the insurer met its duty upon receiving Maria’s communication?