Strategic Claim Payment Delays and Denials? Evidence from Property and Casualty Insurance

Jotikasthira, Chotibhak; Kartasheva, Anastasia; Lundblad, Christian T.; Ramadorai, Tarun

doi:10.2139/ssrn.5115108

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Strategic Claim Payment Delays and Denials? Evidence from Property and Casualty Insurance

Swiss Finance Institute Research Paper No. 25-14

SMU Cox School of Business Research Paper No. 25-4

103 Pages Posted: 28 Jan 2025 Last revised: 6 Jul 2026

See all articles by Chotibhak Jotikasthira

Chotibhak Jotikasthira

Southern Methodist University (SMU) - Finance Department

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research; University of St. Gallen - School of Finance; Swiss Finance Institute; Joshua J. Harris Alternative Investment Program

Christian T. Lundblad

University of North Carolina (UNC) at Chapel Hill - Finance Area; University of North Carolina (UNC) at Chapel Hill - Frank Hawkins Kenan Institute of Private Enterprise

Tarun Ramadorai

London School of Economics & Political Science (LSE); Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: January 27, 2025

Abstract

Insurers raise premiums after adverse events. We show they also slow claim payments and deny more claims, imposing state-contingent costs on policyholders following insured losses, precisely when the value of insurance payouts is highest. Unlike premiums, these responses follow losses in unrelated lines, and the payment slowdown extends even to unaffected regions—not just the same line—pointing to firm-wide financial pressure rather than operational congestion. Deferred payments enlarge insurer float—effectively customer-financed credit—but carry offsetting reputational, regulatory, and customer-discipline costs. Such adjustments concentrate among less-capitalized, less-liquid insurers serving clients less likely to complain. This evidence aligns with insurers’ strategic financial considerations, though whether our observed delays constitute bad-faith conduct in a legal sense remains an open question.

Keywords: Insurance, Claim payments, Delays, Financial constraints

JEL Classification: G21, G32

Suggested Citation: Suggested Citation

Jotikasthira, Chotibhak and Kartasheva, Anastasia and Lundblad, Christian T. and Ramadorai, Tarun, Strategic Claim Payment Delays and Denials? Evidence from Property and Casualty Insurance (January 27, 2025). Swiss Finance Institute Research Paper No. 25-14, SMU Cox School of Business Research Paper No. 25-4, Available at SSRN: https://ssrn.com/abstract=5115108 or http://dx.doi.org/10.2139/ssrn.5115108