Arizona Life and Health Practice Exam

Settling a claim by arbitration is a recognized method of resolving disputes that may arise between an insurer and a policyholder. This process is often outlined in the insurance policy itself and provides a structured way to reach an agreement on a claim. Arbitration is generally seen as a fair and impartial method of settling disputes because it involves a neutral third party making a decision after hearing from both sides.

In contrast, the other options listed involve practices that can be deemed unfair or unethical in the claims settlement process. Denying a valid claim without providing an explanation undermines the trust and transparency expected in an insurance relationship. Failing to acknowledge a claim in a timely manner can significantly inconvenience the insured and may lead to unnecessary delays in obtaining benefits. Delaying payment without a valid reason can also create financial hardship for policyholders who rely on timely claims payment. Therefore, arbitration is distinguished from these practices, as it is a legitimate means of resolving claims rather than an unfair approach to settlement.