Which of the following would be considered an example of unfair claims practice?

The scenario that involves failing to effectuate prompt, fair, and equitable settlements of a claim is clearly an example of unfair claims practice. This is because an insurance company has a legal and ethical obligation to handle claims fairly and without undue delay. When a claims adjuster or insurer neglects this duty, they can undermine the trust that policyholders place in their coverage, potentially causing financial distress to those reliant on timely claim payments.

Unfair claims practices are typically defined by regulatory guidelines and can include various behaviors that delay, deny, or inadequately address legitimate claims. Timeliness and fairness are essential components of good claims handling, and failing to uphold these principles is a direct violation of the standards expected from insurance providers.

In contrast, consulting with policyholders before claim approval, providing detailed explanations of policy coverage, and encouraging claims through proactive customer service are all practices that demonstrate good customer relations and transparency, which are beneficial to policyholders. These actions are supportive and help ensure that clients understand their options and can navigate the claims process more effectively.