Comparison of NAIC Model Regulations
Both the N.A.I.C Unfair Claims Settlement Practices Model Regulation (previous model) and the NAIC Unfair Property/Casualty Claims Settlement Practices Model Regulation (current model) were reprinted by permission of the National Association of Insurance Commissioners. The two are included for reference so policyholders are aware of the rules change.
There are conspicuous differences in the old versus the current model. The first noticeable difference is the statement under Section 1. Authority: The old model specifies that insurance companies are prohibited from engaging in unfair claims settlement practices with such frequency as to indicate a general business practice and that those acts shall constitute an unfair or deceptive act or practice in the business of insurance. The current model merely says, "This regulation is adopted under the authority of the Unfair Claims Settlement Practices Act." An average policyholder reading this current model would probably not understand what is or is not a violation of the regulation because the wording that gave that explanation has now been eliminated.
The next noticeable difference is the statement in the old model under Section 2. Scope: "This regulation defines certain minimum standards which, if violated with such frequency as to indicate a general business practice, will be deemed to constitute unfair settlement practices. . ." The current model merely says under Section 2: that the regulation sets forth minimum standards and the regulation is intended to define procedures and practices which constitute unfair claims practices. No mention is now made of what actually constitutes a violation of the regulation and even further, the new wording goes on to deny that violation of the regulation does create or imply a private cause of action (law suit). So, what we now have is new wording that drops the explanation of what constitutes a violation of the regulation, in favor of an explanation of denying that a violation of the regulation is grounds for a private lawsuit. The current wording goes on to explain, "This is merely a clarification of original intent and does not indicate any change of position."
The next noticeable difference in wording appears under Section 5. Misrepresentation of Policy Provisions; in the old model: "(e) No insurer shall request a first party claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment." The current wording drops this clear concise language and says the insurance company shall not indicate in a letter that a payment is final or is a release of a claim unless the payment coincides. The current wording also says the insurance company shall not issue checks or drafts for partial settlement that include wording to release the insurance company from total liability. However, there is now no wording to stop an insurance company from requesting a policyholder sign a release that extends beyond the subject matter that gave rise to the claim payment; that wording has been eliminated.
The next noticeable differences are under Section 6. Failure to Acknowledge Pertinent Communications. The old wording gave the insurance company ten (10) working days to acknowledge notification of a claim. The current wording gives the insurance company fifteen (15) days.
The old wording gave the insurance company fifteen (15) working days to respond to an insurance department inquiry. The current wording gives the insurance company twenty-one (21) days.
The old wording gave the insurance company ten (10) working days to respond to a communication from a claimant, when a response was expected. The current wording gives the insurance company fifteen (15) days.
The old wording gave the insurance company ten (10) working days within receiving notification of a claim, to provide claim forms, instructions, and reasonable assistance so the policyholder could comply with the policy conditions. The current wording gives the insurance company fifteen (15) days.
The next noticeable differences are under Section 7. Standards for Prompt, Fair and Equitable Settlements Applicable to All Insurers. The old wording says "Every insurer shall complete investigation of a claim within thirty (30) days after notification of claim, unless such investigation cannot reasonably be completed within such time." The current wording says that if the investigation remains incomplete, the insurer shall give written notice to the policyholder within forty-five (45) days of the initial claim notification and then every forty-five (45) days thereafter send the policyholder a letter giving the reasons additional time is needed for investigation. It is quite a different emphasis to require a timely investigation as could be reasonably completed by the insurance company, than it is to require letters from the insurance company to the policyholder explaining why more time is needed for investigation.
Also, the current wording goes on to say, where there is a "reasonable" basis supported by specific information available for review by the department of insurance, that the policyholder has fraudulently caused or contributed to the loss, the insurance company is relieved from the requirements of this subsection provided the insurance company advise if it accepts or denies the claim within a "reasonable" time for "full" investigation after it receives a properly executed proof of loss. No comparable wording existed in the old model and once again curiously missing in both models is any mention of fraud or misrepresentation by the insurance company, its agents, adjusters, or investigators.
Under Section 8. Standards for Prompt, Fair and Equitable Settlements Applicable to Automobile Insurance--(e) Right to Recourse: current wording binds the insurance company to appraisal as a means to resolve a claim in which the policyholder does not agree on a comparable replacement vehicle; however, the insurance company is not required to take action under this subsection if it has provided the policyholder with documentation of availability and location of a comparable vehicle. Old wording did not exist on the matter, but the new wording seems somewhat arbitrary; as if the company completes its obligation without room for difference of opinion on "comparable."
The old model gave the insurance company fifteen (15) working days after receiving the properly executed proofs of loss, to advise the policyholder of the acceptance or denial of the claim. The current wording gives the insurance company twenty-one (21) days.
