An example of an unfair claims settlement practice is what?

Turning down a claim without providing the basis of denial is an example of an unfair claims settlement practice because it undermines the principles of transparency and fairness essential in the insurance industry. Insurers are required to communicate clearly with policyholders about the rationale behind claim decisions. When a claim is denied, policyholders should receive a detailed explanation that helps them understand why their claim was not approved. This is critical for maintaining trust and allowing insured parties the opportunity to appeal or dispute the decision if they believe it to be unjust.

Failure to provide a basis for denial leaves the insured in a state of confusion and frustration, as they may not know what specific issues led to the rejection of their claim or how they might rectify the situation. This lack of clarity is contrary to the ethical standards set forth by insurance regulations and can be considered as taking advantage of consumers who are already in vulnerable positions following a loss.

In contrast, aspects like delaying payment without reason, underestimating claim costs, and requiring excessive documentation can also be problematic, but the key issue with the second option is the complete lack of communication regarding the denial of a claim, which is a core element of fair claims processing.