Which of the following is an example of an unfair claims practice by an auto insurance company?

• A. Delaying payment after settlement
• B. Denying claims without investigation
• C. Underpaying claims without investigation
• D. Requiring excessive documentation

Answer: (A)

Delaying payment after a settlement is a clear example of an unfair claims practice because once the insured and the insurer have reached an agreed-upon settlement, the insurer has a duty to pay promptly. Dragging out that payment undermines the insured’s ability to use those funds and signals bad-faith handling of the claim. State laws prohibit this kind of delay to ensure claimants are treated fairly and paid without unnecessary hold-ups.

Denying claims without investigation or underpaying claims without investigation also reflect bad-faith practices, but they occur when the claim is being evaluated or paid, not specifically after a settlement has been reached. Requiring excessive documentation can be a legitimate part of verification, unless it becomes a tactic to stall payment. The most direct illustration of an unfair practice in this scenario is the deliberate delay of payment after settlement.