An example of which type of practice includes failing to settle a claim promptly and fairly?

The scenario described—failing to settle a claim promptly and fairly—falls under the category of unfair claims practice. This type of practice is characterized by actions that do not align with the principles of good faith and fair dealing that insurance companies are expected to uphold. When an insurer delays or does not provide a fair settlement for a valid claim, it can be detrimental to the policyholder, causing unnecessary financial strain and stress.

Unfair claims practices are often subject to legal scrutiny because they violate regulations intended to protect consumers. Insurers are obligated to process claims in a timely manner and to handle claims with equity. When they do not meet these obligations, they can face penalties, including fines and further regulatory action. Understanding this concept is critical for anyone involved in the insurance industry, as it underscores the importance of ethical behavior and compliance with legal standards in claims handling.