Responsibilities of Insurance Companies

by Flora Richards-Gustafson; Updated September 26, 2017
Clients place a lot of trust in insurance companies.

Insurance companies have a set of responsibilities to which they must abide. Policyholders trust insurance companies to support them during a time of need and follow through with promises outlined in the policy. In addition to responsibilities to their clients, insurance companies also have the legal responsibility to comply with state and federal laws.

Pay a Beneficiary in the Event of a Claim

When a client purchases an insurance policy, he pays a premium every month as part of the contractual understanding that he will receive a certain amount of money in the event of a specific loss. For example, if a policyholder is in an auto collision, the insurance company may be expected to pay for related medical expenses. It is the responsibility of the insurance company to make sure the beneficiary of the policy is paid.

Act Without Discrimination

While an insurance company may reserve the right to refuse service, it cannot refuse service to an individual or cancel a policy based on a client’s marital status, race, disability, religion or sexual orientation. Additionally, an insurance company cannot restrict the terms or benefits listed in an insurance policy because of a client’s marital status, race, disabilities, religion or sexual orientation.

Use Honest Business Practices

Insurance companies cannot use unfair or deceptive acts or practices to gain an edge over the competition or gain new business. Unfair practices include intentionally misinterpreting an insurance policy, participating in a bidding war, making false statements on a policy application or impersonating a client in order to terminate, convert or keep an insurance policy.

Accept and Handle Premium Payments Legally

When collecting premium payment, the insurance company must continue to provide the client with insurance coverage. The company must not keep extra money paid toward a premium. Instead, it must return the excess amount paid to the client in a timely manner.

Handle Claims Accordingly

Insurance companies should make full and prompt claim payments when the liability of a client is not in question. When a client’s insurance claim is denied, the insurance company must provide a reason for the denial. Should the client have a question regarding her claim, the insurance company must respond to the policyholder. Additionally, an insurance company must never harass or intimidate a client during the claims process, ask the client to make false statements or threaten to cancel a policy if a client does not accept a proposed claim settlement amount.

About the Author

Flora Richards-Gustafson has been writing professionally since 2003. She creates copy for websites, marketing materials and printed publications. Richards-Gustafson specializes in SEO and writing about small-business strategies, health and beauty, interior design, emergency preparedness and education. Richards-Gustafson received a Bachelor of Arts from George Fox University in 2003 and was recognized by Cambridge's "Who's Who" in 2009 as a leading woman entrepreneur.

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