Strategic Claim Payment Delays: Evidence from Property and Casualty Insurance

54 Pages Posted: 28 Jan 2025 Last revised: 28 Jan 2025

See all articles by Chotibhak Jotikasthira

Chotibhak Jotikasthira

Southern Methodist University (SMU) - Finance Department

Anastasia Kartasheva

University of St. Gallen - School of Finance; Swiss Finance Institute; Joshua J. Harris Alternative Investment Program

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School; Frank Hawkins Kenan Institute of Private Enterprise

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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

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

Chotibhak Jotikasthira

Southern Methodist University (SMU) - Finance Department ( email )

United States

Anastasia Kartasheva (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Joshua J. Harris Alternative Investment Program ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Frank Hawkins Kenan Institute of Private Enterprise ( email )

Campus Box 3440, The Kenan Center
Chapel Hill, NC 27599-344
United States

Tarun Ramadorai

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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