An unfair claims settlement practice includes which of the following?

• A. Falling to promptly provide a reasonable explanation for the denial
• B. Paying claims promptly
• C. Investigating thoroughly before denying
• D. Requiring excessive documentation for every claim

Answer: (A)

Not providing a prompt, reasonable explanation for why a claim is denied is considered an unfair claims settlement practice. When a claim is denied, the insured needs to understand the basis for that denial and what evidence or information was relied upon. Delaying or failing to give a clear explanation prevents the claimant from understanding the decision, pursuing a proper appeal, or correcting any misunderstandings, which undermines fair dealing in claims handling.

Paying claims promptly is an example of good faith handling, not an unfair practice. Thorough investigation before denying is standard in order to avoid denying claims without sufficient basis, so it isn’t itself an unfair practice when done in good faith. Requiring excessive documentation for every claim could be burdensome, but the key issue in this item is the lack of a timely, reasonable explanation for the denial.