Strategic Claim Payment Delays: Evidence from Property and Casualty Insurance
54 Pages Posted: 28 Jan 2025 Last revised: 28 Jan 2025
Date Written: January 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.
Keywords: 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: Evidence from Property and Casualty Insurance
(January 27, 2025). Swiss Finance Institute Research Paper No. 25-14, Available at SSRN: https://ssrn.com/abstract=5115108 or http://dx.doi.org/10.2139/ssrn.5115108
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN