Before denying a claim, an insurer must take which action?

Before denying a claim, an insurer must take which action?

• A. File a complaint with the Attorney General
• B. Conduct a reasonable investigation
• C. Pay the claim promptly
• D. Notify the insured within 5 days

Answer: (B)

The main idea tested is that a fair and proper claim denial must be based on a thorough check of the facts. Before denying a claim, an insurer is required to conduct a reasonable investigation. This means gathering and reviewing all relevant information—policy terms, coverage, limits, exclusions, the circumstances of the loss, and any documents or statements needed to verify what happened. Only after this investigation supports a denial should the insurer proceed, ensuring the decision is justified and not made on assumptions or incomplete facts. The other actions listed aren’t the required precursor to denial: filing a complaint with the Attorney General isn’t part of the claim-handling process, paying the claim is what happens if coverage exists, and there isn’t a universal 5-day notification rule for denial.

The main idea tested is that a fair and proper claim denial must be based on a thorough check of the facts. Before denying a claim, an insurer is required to conduct a reasonable investigation. This means gathering and reviewing all relevant information—policy terms, coverage, limits, exclusions, the circumstances of the loss, and any documents or statements needed to verify what happened. Only after this investigation supports a denial should the insurer proceed, ensuring the decision is justified and not made on assumptions or incomplete facts. The other actions listed aren’t the required precursor to denial: filing a complaint with the Attorney General isn’t part of the claim-handling process, paying the claim is what happens if coverage exists, and there isn’t a universal 5-day notification rule for denial.