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

Offering settlements that are less than the fair value to offset insurer expenses is an example of an unfair claims settlement practice because it demonstrates a lack of good faith in the insurer's obligation to its policyholders. Insurers are required to act in alignment with the reasonable expectations of policyholders and to settle claims fairly and promptly. When an insurer deliberately offers a settlement that undervalues a claim to preserve its own financial interests, it undermines trust and violates ethical standards governing insurance practices.

This behavior can lead to a perception that the insurer is prioritizing profit over the fair treatment of claimants, which is contrary to the principles of fairness and justice that are foundational in the insurance industry. Claims settlement practices should ensure that policyholders receive compensation that accurately reflects their losses, and failing to do so places the insurer's reputation and integrity in jeopardy.

The other options do not inherently represent unfair claims practices; they involve legitimate actions that can be part of standard claims handling procedures. Denying claims based on specific policy provisions is part of adhering to the terms of the policy; including arbitration in policies is a common practice to resolve disputes; and negotiating on claims with questionable coverage falls within normal claims adjustment practices.