Arizona Adjuster Practice Exam

In what situation may an insurer be responsible for interest on a claim amount?

1. Upon final settlement agreement

2. After failure to investigate

3. Upon late payment following receipt of the claim

4. If both parties request it

The correct answer is: Upon late payment following receipt of the claim

An insurer may be responsible for interest on a claim amount primarily when there is a late payment following receipt of the claim. This situation arises because insurance policies and state regulations generally require insurers to settle claims promptly once they have been received and properly documented. When an insurer delays payment beyond a reasonable timeframe, they may be liable for not only the claim amount itself but also for accrued interest, as it compensates the policyholder for the time they have had to wait for the payment. In many jurisdictions, including Arizona, there are specific statutes that dictate the requirement for timely payment of claims, often with provisions for interest on amounts owed after the payout is delayed. The intent behind this requirement is to ensure that policyholders are not unduly penalized for their insurer's failure to act swiftly in settling legitimate claims. This mechanism serves as a safeguard to encourage insurers to fulfill their obligations promptly and transparently. Other options may touch on relevant aspects of claims handling, but they do not directly address the issue of when interest becomes applicable as a result of the insurer’s actions or inactions in relation to a claim.