What is the purpose of state Unfair Claims Settlement Practices Acts?

State Unfair Claims Settlement Practices Acts (often based on an NAIC model) define and prohibit a list of unfair practices in the handling of insurance claims, in order to protect policyholders and claimants. Prohibited practices commonly include misrepresenting pertinent facts or policy provisions, failing to acknowledge and act promptly on communications, failing to adopt reasonable standards for prompt investigation, not attempting good-faith settlement of clear claims, and compelling insureds to litigate by offering far less than is owed. Violations can lead to regulatory penalties. Adjusters must know and follow these standards. Understanding the purpose of these acts is essential bad-faith/regulatory content for the adjuster exam.