In many jurisdictions around the world, insurance policyholders are protected by insurance claim law. Essentially, this set of laws protects insurance buyers from fraudulent or deceptive activity by insurance companies, such as bad faith on claims payments, charging too much for premiums or fixing rates. Insurance claim law can also guarantee that the wording of the actual insurance policy meets certain basic principles.
One of the main purposes of insurance claim law is to protect consumers from bad faith on the part of insurance companies. Bad faith can occur when an insurance company refuses to pay a claim that is covered under the terms of the insurance policy, when a company takes an unreasonable amount of time to pay a valid insurance claim, or when the insurer does not pay a reasonable amount of money for the loss. A claim of bad faith can also be made if an insurance company puts too much of a burden on the policyholder to prove a loss, particularly in instances where a claim might be difficult to prove.
Consumers who are victims of bad faith have several resources, depending on which jurisdiction they live in. For instance, consumers can try to work through their insurance agent and negotiate a settlement with their insurance carrier, or they can report the insurance carrier to the appropriate regulatory body. If they feel strongly enough that the insurer is breaking insurance claim law, consumers can also pursue lawsuits. Some attorneys specialize in insurance claim law and dedicate themselves to what is called insurance recovery law.
The price of insurance might also be affected by insurance claim law. Regulators in many jurisdictions determine whether insurance rates are set too high. This is particularly relevant for personal-lines insurance coverage, such as homeowners and automobile insurance, but it can involve some business insurance policies, as well, such as workers compensation in some jurisdictions. Insurance companies can also run afoul of insurance law if they engage in price-fixing. This occurs when several insurance companies collude to raise the price of insurance.
It is important to remember, whether asserting bad faith or simply beginning the process of filing an insurance claim, that the law is different in every jurisdiction. Every nation has different insurance laws and practices. In some nations, such as the United States, insurance law may vary from state to state.