Minnesota Life Insurance License Practice Exam

Which of the following is an example of an unfair claim settlement practice?

1. Providing clear policy information

2. Failure to provide a reasonable basis for the denial claim upon request

3. Offering a settlement quickly

4. Making payments within 30 days

The correct answer is: Failure to provide a reasonable basis for the denial claim upon request

An example of an unfair claim settlement practice is the failure to provide a reasonable basis for the denial of a claim upon request. When an insurance company denies a claim, they are obligated to provide clear and justifiable reasons for that denial. If a policyholder requests an explanation and the insurer fails to provide a reasonable basis, it can be seen as an abuse of their authority and a violation of good faith obligations. This lack of transparency can leave policyholders confused and without recourse, undermining the claim settlement process. In contrast, the other options represent actions that are typically aligned with fair practices. Providing clear policy information is essential for transparency and helps policyholders understand their coverage. Offering a settlement quickly is generally viewed as a positive aspect as it promotes efficiency in the claims process. Additionally, making payments within a specific timeframe, such as 30 days, demonstrates the insurer's commitment to resolving claims promptly, which is also an acceptable practice.