Strategic Claim Payment Delays:Â Evidence from Property and Casualty Insurance

Authors

Chotibhak Jotikasthira, Southern Methodist University (SMU) - Finance DepartmentFollow
Anastasia Kartasheva, University of St. Gallen - School of Finance; Swiss Finance Institute; Joshua J. Harris Alternative Investment ProgramFollow
Christian T. Lundblad, University of North Carolina Kenan-Flagler Business School; Frank Hawkins Kenan Institute of Private EnterpriseFollow
Tarun Ramadorai, Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)Follow

Publication Date

1-27-2025

Abstract

Following adverse events, insurers not only raise premiums but also delay claim payments, potentially imposing high state-contingent costs on clients who experience losses. These delays increase losses payable, one of the largest liability items on insurers’ balance sheets, augmenting insurer liquidity analogously to interest-free credit. Claim payment delays are larger and more prevalent for insurers that are less capitalized, less liquid, and those who serve clients who are less likely to complain to the regulator. In addition to losses in the same line of business, delays, unlike premiums, also increase in response to losses in unrelated lines of business.

Document Type

Article

Keywords

Claim payments, Delays, Financial constraints

Disciplines

Finance

DOI

10.2139/ssrn.5115108

Source

SMU Cox: Finance (Topic)

Language

English