What is an example of an unfair claims settlement practice?

An example of an unfair claims settlement practice is the failure to promptly settle a claim when liability has been clearly established. In the insurance context, once it's determined that the insurer is liable for a claim, it is expected that the insurer acts swiftly to settle the claim fairly. Delaying settlement under these circumstances can be viewed as bad faith, as it causes unnecessary stress and financial strain on the insured who is relying on the insurer to honor the policy. Prompt settlement fosters trust and maintains the integrity of the insurance system, ensuring that policyholders receive the benefits they are entitled to without undue delay.

Denying coverage after a reasonable investigation, making claims payments that clearly indicate the coverage under which payment has been made, and using arbitration are more standard practices in handling claims. These actions are typically considered part of normal operations and do not constitute unfair practices if they are executed fairly and in accordance with the terms of the policy.