An example of an unfair claims settlement practice is:

Turning down a claim without providing the basis of denial exemplifies an unfair claims settlement practice because it undermines the principles of transparency and accountability that are essential in the insurance industry. When an insurer denies a claim, it is their responsibility to clearly communicate the reasons for that denial to the policyholder. This allows the policyholder to understand why their claim was not accepted and gives them the opportunity to rectify any issues or to appeal the decision.

Failing to provide this information is not only frustrating for the policyholder but also can lead to a lack of trust in the insurance system. An insurer’s obligation to explain the basis of a denial is anchored in consumer protection laws and guidelines, which seek to ensure that claimants are treated fairly and equitably. This practice is considered unfair because it limits an individual’s ability to contest the decision, leaving them without clarity or recourse.