What does the Fair Claims Practices Act aim to establish?

The Fair Claims Practices Act is designed to establish clear and fair standards for how insurers handle claims. This legislation is essential because it aims to protect policyholders by ensuring that insurance companies follow specific guidelines when evaluating and processing claims. By outlining standards for insurers, the act seeks to promote integrity, transparency, and accountability in the claims-handling process. This helps to prevent unfair practices such as delaying claims, underpaying claims, or wrongfully denying claims, thereby ensuring that policyholders receive the benefits they are entitled to under their insurance contracts.

The other options focus on different aspects of insurance practice. Guidelines for underwriting procedures relate to how risks are assessed and premiums set before policies are issued, while regulations for policyholder communication address how insurers interact with their clients and provide information. Standards for premium calculation deal with the methodology used by insurers to determine how much policyholders should pay for their coverage. While these are all important areas within the insurance industry, they do not encapsulate the primary goal of the Fair Claims Practices Act, which is centered on claims handling.