Postclaim Underwriting and the Verification of Insured Information: Evidence from the Life Insurance Industry

32 Pages Posted: 12 Feb 2019

See all articles by Jill M Bisco

Jill M Bisco

University of Akron - Department of Finance

Kathleen A. McCullough

Florida State University - College of Business

Charles Nyce

Florida State University

Date Written: March 2019

Abstract

This research investigates information verification by life insurers with respect to postclaim underwriting through denied and resisted claims. We provide a theoretical model to explore the optimal strategy for insurers regarding preloss versus postclaim underwriting. Using differential cost structures, the model predicts that it is possible for some insurers to follow a strategy of postclaim underwriting while others do not. Evidence of this is found in the empirical analysis. Insurers that postclaim underwrite are identified by a decrease in underwriting expenses and an increase in the claim investigation expense in conjunction with increases in denied and resisted claims.

Suggested Citation

Bisco, Jill M and McCullough, Kathleen A. and Nyce, Charles, Postclaim Underwriting and the Verification of Insured Information: Evidence from the Life Insurance Industry (March 2019). Journal of Risk and Insurance, Vol. 86, Issue 1, pp. 7-38, 2019, Available at SSRN: https://ssrn.com/abstract=3332577 or http://dx.doi.org/10.1111/jori.12189

Jill M Bisco (Contact Author)

University of Akron - Department of Finance ( email )

Akron, OH 44325-4803
United States

Kathleen A. McCullough

Florida State University - College of Business ( email )

Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)

Charles Nyce

Florida State University ( email )

821 Academic Way
349 RBB, College of Business
Tallahassee, FL 32306
United States
850-645-8392 (Phone)

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