What is an example of unfair claims practices?

Unreasonably withholding payments to policy owners is an example of unfair claims practices because it violates the expectation that insurance companies will handle claims in a fair and timely manner. Insurers are obligated to investigate claims thoroughly and make payments based on the terms of the policy and the circumstances of the claim. When a company unjustifiably delays or denies a payment without adequate reason, it undermines the trust between the insurer and the insured and is considered a deceptive practice. Such actions can harm policyholders financially and emotionally, as they depend on timely settlements when they are in need.

The other options reflect actions that either provide an immediate benefit to policyholders—like prompt payment in option A—or promote a positive claims process, as seen in option C, where bonuses might be offered for expedited claims processing, and option D, which encourages policyholders to report potential claims. These practices are aligned with ethical standards in the insurance industry.