The UCSPA is a model act created by the National Association of Insurance Commissioners to provide guidance for states wishing to protect consumers and regulate insurance carriers. The model act has been adopted in most states.
How Does the Act Regulate Insurance Carriers?
The UCPSA has three general categories of regulation.
(1) Misrepresentations & Bad Faith Practices
The UCSPA prohibits insurance carriers from:
- Misrepresenting facts or insurance policy provisions
- Trying to settle claims for less than should be reasonably expected based on insurance ads
- Offering bad faith settlement amounts to compel the insured to litigate
- Materially altering claim requests
- Not granting claim requests or settling, when liability is reasonably clear
(2) Claim Responses
The act prohibits insurance carriers from:
- Failing to adopt or act reasonably promptly when claims are presented
- Not affirming or denying claim requests in a reasonable amount of time
- Failing to provide necessary forms for claim recovery requests within 15 days of the request
- Delaying payment or investigation by requiring duplicate proofs of loss
- Failing to provide explanations for claim denials or settlement offers
- Failing to identify what coverage applies to a payment to the insured
Insurance carriers are required to adopt and implement reasonable standards for prompt investigation of claims and may not refuse to pay a claim without an investigation.
How Is the Act Enforced?
The act allows the state insurance commissioner to enforce the regulations through investigations and sanctions on insurance carriers. Some states also allow individuals to bring private actions against insurance carriers for rule violations.
What Are the Penalties for Rule Violations?
The UCSPA provides for penalties of:
- $1,000 per violation if there are not aggravating circumstances
- $25,000 per penalty when violations are committed flagrantly and in conscious disregard of the act
When Should I Contact an Attorney?
If you believe your insurance carrier has violated one of the regulations, you should contact an experienced financial attorney to learn what relief is available for you in your state.