Which of the following constitutes an unfair claim settlement practice?

Refusing to pay valid claims constitutes an unfair claim settlement practice because it goes against the ethical and legal obligations of an insurance provider. Insurers have a duty to honor valid claims made by policyholders who have upheld their end of the contract by paying premiums. When a legitimate claim is unjustly denied, it not only breaches the terms of the insurance policy but also undermines the trust between insurers and their clients. This practice can lead to potential legal consequences for the insurer and creates a negative impact on the overall reputation of the insurance industry.

In contrast, activities like promptly investigating claims, providing fair compensation, and communicating effectively with policyholders are all essential components of good faith insurance practices. These actions enhance the relationship between insurers and policyholders, ensuring transparency and fairness throughout the claims process.