Claims Management and Client Advocacy in Insurance – Part 2

Responsibilities of Insurers and Rights of Policyholders

Insurance is a contract of utmost good faith – a foundational principle meaning both parties (insurer and insured) must act with complete honesty and fairness toward each other. Nowhere is this principle more tested than in the handling of claims. Insurers have explicit responsibilities under laws, regulations, and industry codes to treat claimants fairly. Correspondingly, policyholders have rights to fair treatment and to receive what they are contractually owed. A skilled adviser should be well-versed in these duties and rights, as they form the basis of holding insurers accountable and advising clients of their entitlements.

Let’s outline key responsibilities of insurers (common across many jurisdictions, including Australia) and the matching rights of policyholders:

• Duty to Act in Utmost Good Faith: In Australia, Section 13 of the Insurance Contracts Act 1984 imposes on both insurers and insureds a duty to act with utmost good faith in relation to the insurance contract. For insurers, this means they must handle claims honestly, fairly, and with regard to the legitimate interests of the insured. For example, an insurer should not intentionally delay payment of a valid claim to leverage the claimant’s desperation, nor should they seize on a trivial technicality to deny a claim that, in good conscience, should be paid. A breach of this duty by an insurer can lead to legal consequences, including damages or being overturned by a dispute resolution body. Policyholder’s right: The client has a right to be treated decently and fairly – they should expect the insurer to give their claim genuine consideration, not approach it with a mindset of “How can we avoid paying this?” In fact, Australian courts have said utmost good faith means an insurer must act consistently with commercial standards of decency and fairness, with due regard for the insured’s interests. Advisers can cite this right if they sense an insurer’s behavior is falling short.
• Obligation to Handle Claims Promptly and Efficiently: Regulators and codes worldwide stress timely claims handling. The Australian Securities and Investments Commission (ASIC) requires insurers (now that claims handling is a licensed financial service) to provide their services efficiently, honestly, and fairly. The General Insurance Code of Practice (2020) in Australia, for instance, sets specific timeframes: insurers must respond to claim notifications within certain days, make a decision on a claim within a reasonable time (if a claim is straightforward, an outcome is expected within 10 business days; if complex, they must keep the claimant informed at least every 20 business days on progress). If a claim cannot be finalized within a certain period (e.g., four months for non-complex claims, as per some code provisions), the insurer must explain why and keep updating the customer. Similarly, the Life Insurance Code of Practice has time standards (e.g., initial claim decision on income protection within 2 months, with allowances for extension if waiting on information). Policyholder’s right: The client has a right to not be subject to undue delays. They can expect regular updates and a decision in a reasonable time. If an insurer drags its feet without cause, the client (through their adviser) can complain and even seek interest on delayed payments if it’s causing loss. In the UK, for example, since 2017 there’s a statutory requirement that insurers must pay claims within a “reasonable time” or else the policyholder can claim damages for any late payment beyond that reasonable time. While Australia doesn’t have an identical statute for damages for late payment, the principle of timely payment is enforced through codes and general fairness obligations.
• Requirement of Fair Investigation and Assessment: Insurers are required to investigate claims to verify legitimacy, but they must do so reasonably. The policyholder’s rights here include not being subjected to overly intrusive or unnecessary investigations. For instance, the Life Insurance Code mandates that if surveillance is used (for suspected fraud in a disability claim, for example), it must be a last resort and not done in a way that harasses the claimant. The insurer must also attempt to resolve any inconsistencies in information by talking to the claimant before resorting to surveillance or other drastic steps. Insurers should also ensure their claims assessors are properly trained and competent – which is an obligation in both Life and General Insurance Codes. So, a client has the right to have their claim assessed by qualified personnel, and if a medical opinion is needed, by appropriately experienced medical professionals. If an insurer is making a medical judgment internally without an expert, one could question that. Additionally, reasonable standards mean an insurer should not, for example, repeatedly ask for the same information or ask for irrelevant documents; those could be deemed unfair practices. The NAIC Unfair Claims Practices model in the US explicitly calls out “unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss and subsequent verification that results in duplication of information.”
• Not Misrepresenting Policy Provisions: When communicating about a claim, insurers must be truthful and clear about what the policy covers. A nefarious practice would be to mislead a claimant about their rights or about how a clause works, to discourage a claim. That is illegal. Policyholder’s right is to receive accurate information. In fact, in Australia, general consumer law (Australian Consumer Law) also prohibits misleading or deceptive conduct in financial services. If an insurer’s representative says something untrue (e.g., “Oh, your policy doesn’t cover heart attacks if you survive, so no payout,” when the policy actually does cover certain scenarios), the client can hold them to account. Advisers often know the policy fine print better than the claims call-center staff, and can correct any misstatements.
• Obligation to Explain Decisions and Provide Documentation: If an insurer denies or partially denies a claim, they should give a written reason citing the relevant policy provisions. They should also, upon request, provide copies of documents and information that was used in the assessment (this is actually required by the Life Insurance Code – they must provide copies of medical reports or information that their decision was based on, unless there is a health risk reason not to). Policyholder’s right: The client can obtain those documents and is entitled to an explanation. This transparency helps the claimant (and their adviser) evaluate whether the decision was correct. If an insurer refuses to give a clear reason or hides information, that would be a breach of their obligations. In some jurisdictions, claimants have a legal right to access information the insurer holds about their claim (for example, under privacy/data protection laws or specific insurance regulations).
• Avoiding Unreasonable Denial of Claims: Many regulations explicitly say an insurer must not reject a claim unreasonably. For instance, the UK’s FCA rule (ICOBS 8) says an insurer must not unreasonably deny a claim, including by invoking terms or conditions that are unfair. In Australia, the combination of good faith and fairness obligations cover this – a blatant example of unreasonable denial would be relying on an obsolete medical definition or an exclusion that clearly doesn’t apply to the situation. If an insurer does that, a policyholder has the right to challenge it. Notably, if a denial is found to be in bad faith in some jurisdictions (like many U.S. states), the insurer can be liable for extra damages beyond just the claim amount.
• Payment of Claims and Interest: Once a claim is approved, insurers are obligated to pay promptly. In some policies or jurisdictions, if payment is delayed, interest may accrue. For example, in Australia under the Life Insurance Act, if a life insurance claim (like death claim) is not paid within a certain time after admission, the insurer may be required to add interest to the payout. Also, if an ombudsman or court later overturns a denial, they often award interest from the date the claim should have been paid. Policyholder’s right: to receive their money as soon as practicable once the right to payment is established, and to be compensated for any undue delay.
• Special Provisions for Hardship and Vulnerability: Modern insurance codes and laws increasingly recognize that some customers need extra care. Insurers in Australia, for instance, must have policies for customers experiencing vulnerability (which could be due to health, language barriers, financial distress, etc.) and financial hardship. In claims context, if a person is in urgent need, the General Insurance Code says the insurer should fast-track the claim or make an advance payment to alleviate hardship. If a claimant is vulnerable (for example, has a mental health condition or cognitive impairment), insurers should handle communications with extra sensitivity and possibly via an appropriate representative. Policyholder’s right: The client can expect reasonable accommodation of their circumstances. Advisers can remind insurers of these obligations – for example, “My client is suffering severe anxiety due to this situation; as per the Code, please ensure your communications take this into account and maybe direct communications through me as their adviser to avoid unnecessary stress on them.” Another scenario: if a natural disaster causes thousands of claims (like a flood or bushfire), insurers often have catastrophe response sections in codes – they may relax some timeframes or provide emergency funds. Clients have a right to these disaster-relief measures if applicable.
• Internal Dispute Resolution (IDR): Insurers must have a free and fair internal process to review complaints about claims. Policyholder’s right: to have their complaint heard by someone not directly involved in the initial decision, and to receive a written final decision from the insurer. In Australia, IDR responses to a claim dispute should inform the client of their right to go to AFCA if not satisfied. Similarly in the UK, final response letters must inform the customer of the right to escalate to the Financial Ombudsman. Clients have a right to this information and to an unbiased review.
• External Dispute Resolution: While not an obligation of the insurer per se (it’s an industry scheme), practically insurers must cooperate with external ombudsmen like AFCA or FOS. Policyholder’s right: access to an independent dispute resolution without needing to go to court, typically free of cost. This is a critical right because it levels the playing field – the client isn’t forced to mount an expensive legal case to get a fair outcome. Advisers should ensure clients know about this and can exercise this right if needed.

To summarize, insurers are expected to: be honest, be prompt, be fair, communicate clearly, honour the contract, and support the customer’s needs where possible. Policyholders have the right to: be informed, be treated fairly and with empathy, have their claim decided on its merits (not on improper factors), get what they are owed per the contract, and challenge decisions they believe are wrong.

For financial advisers, these rights and obligations are the tools of the trade when advocating for clients. For example, if an insurer isn’t providing a reason for delay, an adviser might cite code obligations to remind them. If a client’s claim is denied due to a non-disclosure, the adviser might examine whether the law actually permits avoidance of the policy – under current law, a life insurer in Australia can only avoid a contract for non-disclosure/misrepresentation if they can show they wouldn’t have issued any policy at all if they had known the truth (a change from earlier, stricter rules). If that threshold isn’t met, the adviser can contest the denial.

Being knowledgeable in this domain also means advisers can educate clients on their rights. For instance, if a client is frustrated that a claim is taking long, the adviser can say, “You have the right to regular updates – let me request an update per the Code of Practice, which says they need to keep you informed.” Or if a claim is denied, “You have the right to challenge this through AFCA. I’ll help you prepare that.”

In practice, many advisers compile a claims service charter for their practice – informing clients that “if you ever need to claim, we will do X, Y, Z for you, and ensure that the insurer abides by their obligations.” This is a great value proposition and aligns with the regulatory environment that increasingly stresses the importance of good claims outcomes as part of overall financial product governance (for example, the design and distribution obligations in Australia require issuers to monitor outcomes like claims to ensure products are meeting consumer needs).

Now that we have covered the insurer’s duties and the client’s rights in a general sense, we will examine how these play out in different parts of the world. This comparative view will highlight best practices and regulatory trends that Australian advisers should be aware of, both for compliance and to draw on ideas from elsewhere in advocating for clients.

Regulatory Landscape and Global Comparisons

Insurance claims handling and client advocacy do not occur in a vacuum; they are influenced by the regulatory frameworks and industry standards in place. Financial advisers in Australia primarily operate under Australian laws and regulations, but being aware of global approaches can provide broader insight into best practices and emerging trends. In this section, we compare the Australian regulatory environment with that of other major markets (notably the United Kingdom and the United States), and also touch on international standards that guide insurance supervision worldwide. We will also discuss the ethical and professional standards that advisers should uphold in claims advocacy.

Australia: Stronger Protections Post-Royal Commission

Regulatory oversight: In Australia, the regulation of claims handling has tightened significantly in recent years. Historically, handling an insurance claim was not considered a “financial service” and thus not directly overseen by ASIC. This changed in response to the Financial Services Royal Commission (2018–2019), which uncovered instances of poor claims practices (one infamous example was CommInsure, a life insurer, denying trauma claims for heart attacks based on an outdated medical definition – leading to public outrage and a push for reform). As a result, the law was amended: since 1 January 2022, “claims handling and settling services” are officially regulated as a financial service under the Corporations Act. This means any insurer (or other entity) in the business of claims handling must hold an Australian Financial Services Licence (AFSL) or be an authorized representative, and they are subject to ASIC’s oversight and its general conduct obligations (like acting efficiently, honestly, fairly).

ASIC has issued detailed guidance (Info Sheet 253) on what this entails. It covers who needs a licence and how to comply. For advisers, one key point is that there was concern that “claimant intermediaries” (like claims advocates or lawyers who represent claimants for a fee) would also need to be licensed. The regulations clarified some exemptions – for instance, financial advisers who merely assist their client with a claim (as part of their advisory service and not charging a separate fee purely for claims handling) generally do not need a separate licence for that activity. The idea was not to burden individuals assisting claimants, but rather to ensure companies that do claims management as a business (or insurers themselves) meet proper standards. Nonetheless, advisers should be mindful that they cannot, for example, negotiate claims settlement offers for remuneration without proper authorization – but giving advice and support to their own client is fine as part of their advisory role.

ASIC and enforcement: ASIC has been actively monitoring insurers’ claims handling. By 2024, it publicly stated that claims handling is a key focus, and it has not hesitated to investigate and take action against insurers for systemic delays or unfair practices. For example, ASIC’s Regulatory Guide 271 on internal dispute resolution sets enforceable standards for how insurers must deal with complaints (including those about claims). ASIC found in late 2024 that some insurers were falling short, especially in the general insurance space with flood claims delays – prompting stern warnings. For advisers, this means the regulatory climate is on their side when insisting on fair treatment: insurers know they could face penalties if they breach conduct obligations in claims.

Industry codes: Australia has robust industry codes that, while technically voluntary, cover the vast majority of insurers and are increasingly being given legal force. The General Insurance Code of Practice (2020) and the Life Insurance Code of Practice (most recently updated version 2.0 in 2022) set out detailed commitments on claims:

• They require insurers to be honest, fair, respectful, transparent, and timely.
• They put strict limits on how claims people can behave (for instance, life insurers must not pressure doctors to change opinions, must consider the customer’s point of view when information is inconsistent, and use surveillance only appropriately).
• There are set timeframes for contacting claimants and making decisions. Under the Life Code 2.0, some timeframes were even tightened further. For example, insurers have to keep claimants informed at least monthly on progress if a claim is ongoing, and they must make a decision on a claim as soon as possible once all information is in (with guidelines for certain types of claims).
• The codes also emphasize support for vulnerable customers, as noted earlier, and require training for claims staff on empathy and sensitivity (especially regarding mental health claims).
• If an insurer breaches the code, customers can report it and it can lead to sanctions via the code governance committee, though more serious breaches likely also breach legal obligations.

Following the Royal Commission, there’s a mechanism for parts of these codes to become enforceable by law (through ASIC’s approval). This hasn’t fully happened yet for the insurance codes, but it’s expected in the future. Advisers should thus see code provisions as quasi-mandatory standards that insurers ought to follow.

External dispute resolution: The Australian Financial Complaints Authority (AFCA) is central to consumer protection in insurance claims. AFCA can handle disputes across all insurance types. It has the power to make binding determinations up to specified monetary limits (for insurance, generally up to $1,085,000 for a claim, as of 2025, with higher amounts by mutual agreement or as a recommendation). AFCA’s approach is to consider what’s fair in all circumstances, the law, industry codes, and good industry practice. It’s worth noting that AFCA statistics have shown high numbers of complaints in general insurance lately (especially in events like floods where claims issues surge). Life insurance complaints are fewer, but as an article from late 2024 noted, a significant portion of life insurance complaints relate to delays and claim denials, often involving misunderstandings of policy terms. AFCA’s commentary stressed the need for insurers to improve transparency and communication during claims – reinforcing many points we have discussed. For advisers, the existence of AFCA means there is always a “court of appeal” if negotiations fail – a strong backup when advocating with an insurer (the implicit message being, “We’d prefer to resolve this amicably, but we are prepared to go to AFCA if needed”).

FASEA Code of Ethics and adviser obligations: On the adviser side, Australian financial planners are bound by a Code of Ethics (originally developed by FASEA, now overseen by ASIC and Treasury) which, while not specific to claims, broadly requires:

• Act in the client’s best interests and place the client’s interests ahead of your own (Standards 2 and 5).
• Provide services with competence, honesty, and fairness (these principles align well with being diligent in claims support).
• Communicate in a way that the client understands (very relevant to explaining claim processes and outcomes).
• Uphold the values of trustworthiness and professionalism (fighting for a fair claim outcome can be seen as upholding justice for the client).
  Advisers should see assisting in claims as part of their duty of care – even though it’s not explicitly mandated in the law that an adviser must handle claims, it certainly falls under providing ongoing service that was likely promised to the client. Neglecting a client during claim time could arguably breach the spirit of these ethical standards and certainly would breach the trust element of an ongoing adviser-client relationship.

In summary, Australia’s current framework strongly emphasizes fair treatment in claims. Financial advisers can leverage this by reminding insurers of their obligations, and they should also ensure their own practices align with giving clients the support these rules envision.

United Kingdom: Treating Customers Fairly and Timely Payouts

The UK has a well-developed regulatory system for insurance, with a strong focus on consumer protection in claims.

FCA rules and principles: The Financial Conduct Authority (FCA) regulates conduct for insurers and intermediaries. One of the core Principles for Businesses is Principle 6: a firm must pay due regard to the interests of its customers and treat them fairly. This overarching principle gave rise to the Treating Customers Fairly (TCF) initiative, which heavily influences claims handling. More specifically, the FCA’s Insurance Conduct of Business Sourcebook (ICOBS) contains Section 8 which deals with claims. ICOBS 8.1 sets out clear rules:

• Insurers must handle claims promptly and fairly.
• They must provide reasonable guidance to policyholders about how to make a claim and keep them informed about its progress.
• They must not unreasonably reject a claim. The rules even give examples of what counts as unreasonable rejection – like rejecting a claim for non-relevant nondisclosure in consumer insurance, or where the claim condition (like reporting within 24 hours) wasn’t met but that didn’t prejudice the insurer.
• Once a settlement is agreed, they must pay promptly.

These are binding and enforceable. The FCA can (and has) fined companies for failing in these duties. In 2018, a major general insurer in the UK was fined millions of pounds for mishandling claims – in that case, it was found they had unreasonable home insurance claim denials and poor communication, breaching the FCA rules. This serves as a warning to insurers that there are real consequences for unfair claim practices. For a claimant (and their adviser), it means the regulatory system backs them up on what is fair and timely.

Late payment law: A significant development in UK law is the introduction of the Enterprise Act 2016 amendments to the Insurance Act 2015, which created a legal obligation for insurers to pay claims within a “reasonable time.” If they do not, the policyholder can sue for damages caused by the late payment (this is separate from the claim amount itself). This was a big shift, as previously in English law, strangely, you couldn’t easily claim damages for late payment (you’d just get the claim amount, with limited interest). Now insurers have a clear incentive to avoid undue delays, especially deliberate ones. What is a “reasonable time” can depend on the claim’s complexity, but the principle is clear. So a UK policyholder has the right not just to interest but to consequential loss if, say, an insurer’s slow payment caused them financial harm (like needing to take a loan). Advisors in the UK would know to flag this if necessary in an escalation: e.g., “It’s been X months, which we consider beyond a reasonable time for this straightforward claim; our client reserves the right to claim damages for late payment under the Act if this isn’t resolved.”

Financial Ombudsman Service (FOS): The UK’s external dispute resolution is the Financial Ombudsman Service. It works similarly to AFCA – free for consumers, binding decisions on firms up to certain limits (currently the compensation limit is £415,000 for complaints about acts from 1 April 2023 onwards, which covers most retail insurance claims). FOS also can award additional compensation for distress and inconvenience, which often comes into play for botched claims handling. For example, if an insurer handled a claim really poorly, FOS might order the claim to be paid and an extra few hundred pounds for the trouble caused to the customer. UK advisers aren’t typically as involved in insurance claims (since many insurances are sold direct or through brokers), but a financial planner who arranged a protection (life) policy would certainly assist their client and could help them complain to FOS if needed. The UK ombudsman decisions and published guidelines put a lot of emphasis on fairness and what’s reasonable – often interpreting policy ambiguities in favor of customers.

Claims and the Consumer Duty: A new thing in the UK is the Consumer Duty (in force from mid-2023), which heightens firms’ obligations to deliver good outcomes to customers. This applies across the product lifecycle, including claims. Insurers and intermediaries must avoid causing foreseeable harm and must act to deliver good outcomes. For claims, this means they should design processes that don’t frustrate legitimate claims and should monitor metrics like claims acceptance rates, claims complaints, etc., as indicators of whether their products are actually performing as promised for consumers. The Consumer Duty has led firms to review claims communications (making them clearer) and ensure any third-party administrators (TPAs) handling claims on their behalf adhere to high standards. It’s a cutting-edge approach that might influence other countries in time.

Ethical standards: In the UK, advisors (financial planners) are governed by codes from bodies like the Chartered Insurance Institute (CII) or CISI, which similarly stress client interests first, integrity, etc. For claims, though not explicitly covered, an adviser would be expected ethically to support a client through the process as part of their service commitment, especially if they sold the policy.

In short, the UK’s system provides strong backing for fair, fast claims. An Australian adviser can take note that many of these principles (fair, prompt, clear communication) are universal. Also, the idea of paying claims within a reasonable time under threat of damages is something Australian law doesn’t explicitly have, but our regulators might achieve the same effect through enforceable code provisions or RG271 which sets complaint timeframes.

United States: State-Level Regulation and the Bad Faith Doctrine

The United States presents a different picture because insurance is regulated primarily at the state level, not federal. There is no single equivalent of ASIC or FCA for insurance; instead, each state has an insurance department led by a Commissioner. However, through the National Association of Insurance Commissioners (NAIC), states often adopt model laws for some consistency.

Unfair Claims Settlement Practices laws: Nearly every state has enacted a version of the NAIC’s Unfair Claims Settlement Practices Act (UCSPA). These laws list a range of insurer actions that are deemed unfair or bad practices. Common elements include:

• Failing to acknowledge and act reasonably promptly upon communications about claims.
• Failing to have reasonable standards for prompt investigation of claims.
• Refusing to pay claims without conducting a reasonable investigation.
• Not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims when liability is reasonably clear.
• Compelling policyholders to sue by offering substantially less than claims are worth.
• Misrepresenting pertinent facts or policy provisions.
• Delaying investigation or payment by requiring unnecessary paperwork or duplicative forms.
• As a whole, engaging in patterns that indicate a general business practice of unfair handling.

These laws are enforced by state insurance commissioners, who can investigate insurers and impose fines or other sanctions if they find violations (usually they look for patterns of misconduct rather than an isolated incident, unless it’s egregious). Some states allow policyholders a direct cause of action (lawsuit) under these statutes, but many do not (they leave enforcement to regulators). Even where there’s no direct action, the content of these laws influences what’s considered “bad faith.”

Bad faith insurance lawsuits: A hallmark of the US system is the ability for insureds to sue an insurer for “bad faith” in handling a claim, under common law or statutory provisions, depending on the state. If an insurer is found to have acted in bad faith – for example, deliberately lowballing a claim, ignoring evidence, unreasonable denial – courts can award the claimant not just the contract benefits but also extra-contractual damages. These can include consequential losses, emotional distress damages, and even punitive damages aimed to punish the insurer. In some famous cases, punitive damages have been several times the claim amount, especially when internal memos showed the insurer’s malintent or profit-driven claim denial schemes. This threat is a strong incentive for insurers to avoid playing hardball unfairly.

For instance, in California, first-party insurance bad faith (the relationship between an insurer and the insured) is a well-established doctrine. If a homeowner’s insurer unreasonably delays or denies payment, the insured can sue and potentially recover attorney’s fees, economic loss (e.g., if they had to rent a place longer because the claim was delayed), and punitive damages if the conduct was malicious. Many cases never go to trial; instead, the mere potential of a bad faith suit leads insurers to settle contentious claims to avoid that exposure.

Role of attorneys and public adjusters: In the US, it’s very common for claimants to hire attorneys or licensed public adjusters when facing a dispute. Public adjusters are professionals who, for a fee (often a percentage of the claim), will handle and negotiate the claim for the policyholder. Financial advisers (in the sense of investment/retirement advisors) typically don’t engage directly in property/casualty insurance claims – that’s more often handled by insurance agents/brokers or the specialists mentioned. For life insurance or disability claims, sometimes attorneys are hired if there’s a denial.

However, a financial planner who helped a client get a disability insurance policy, for example, would likely assist them initially (similar to how we describe advisers in Aus/UK doing it). If it escalates, they might then refer to an attorney who specializes in disability claims. The client advocacy ecosystem in the US thus includes these legal avenues. As an adviser reading the US context, one can glean that one of the best practices in the US is maintaining detailed records and communications during claims, because if it does go legal, those become evidence. It’s also notable that because litigation is more prevalent, sometimes insurers in the US can be more defensive; whereas in markets with strong ombudsmen, things might be resolved earlier in a non-legalistic way.

Consumer assistance: State insurance departments often have consumer assistance units. A consumer (or adviser on their behalf) can file a complaint with the regulator. The regulator will investigate the complaint, which often involves contacting the insurer for a response. While they won’t adjudicate the claim’s merits like an ombudsman would, the fact that a regulator is looking at it can motivate an insurer to reevaluate a denial. If the insurer clearly violated a law (like missed mandated timeframes), the regulator might enforce a fine or order corrective action. For example, many states require insurers to accept or deny a claim within a set time (often 30 to 45 days) or to send a letter explaining why more time is needed. Not meeting these can result in penalties.

Timeframes: Speaking of mandated timeframes, a number of states have regulations like: acknowledge a claim within X days (often 10-15), provide claim forms within Y days, decide on claim within Z days or provide status updates every 30 days, etc. This is akin to the code obligations in Aus/UK but in the US they are codified in regulations. While there’s variation, the underlying concept is the same – the claimant shouldn’t be left waiting indefinitely.

Reputation and market forces: The US, like other places, also has the court of public opinion. Insurers care about their reputation; high-profile cases of bad faith can severely damage a brand. Advisors in the US will often be aware of which insurers have good reputations for paying claims fairly and could guide clients toward those when selecting policies (similar to Australia, where advisers might avoid insurers known for problematic claim histories).

In summary, the US system gives policyholders potent weapons (bad faith litigation, regulatory complaints), but it may require engaging lawyers, which can be costly without guarantees (though many attorneys work on contingency for big claims). The Australian approach of an ombudsman is arguably more accessible for everyday disputes. Nonetheless, as an Australian adviser, knowing that in the US an insurer could be whacked with punitive damages for, say, knowingly misrepresenting a policy term to deny a claim, reinforces the idea that such behavior is universally considered egregious. It bolsters one’s confidence in calling out unfair conduct.