Insurance Claims Handling

Before diving into the rules, let’s clarify important terms:

• Claimant (§2695.2(c)) – Any person making a claim. This can be the insured, a beneficiary, or even 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.

Think of these as the “building blocks” for every claims process.

File and Record Documentation

Insurers are required to document every step in 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 paper trail that ensures 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, they must act quickly:

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

This prevents delays and keeps the claimant informed throughout the process.

Standards for Prompt, Fair, and Equitable Settlements

Insurers have strict timelines and duties when 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 make sure insurers treat every claim with fairness, speed, and transparency.