Which of the following is considered an unfair claims settlement practice?

The failure to promptly settle a claim when liability has been clearly established is considered an unfair claims settlement practice because it undermines the insured's right to receive timely compensation for their loss. Insurance policies are designed to provide protection and assurance to policyholders that when they suffer a loss, they will be dealt with fairly and promptly.

When an insurer delays settling a claim in a situation where the liability is clear, it can cause undue stress and financial hardship for the insured, who may be relying on those funds to recover from their loss. Such practices are seen as contrary to the ethical obligations of insurers to act in good faith and fair dealing. Regulations governing insurance practices exist to protect consumers from these types of behaviors, and timely settlement is a critical aspect of fulfilling that obligation.

The other options do not reflect unfair practices. Denying coverage after a reasonable investigation indicates that the insurer is fulfilling its duty to assess claims accurately. Making claims payments that clarify coverage helps to maintain transparency with the insured regarding what is being paid and why. Using arbitration as a means of resolving disputes is a common practice in insurance to facilitate resolution without court involvement, which can be beneficial for both parties.