Why Do Insurance Companies Deny Claims?

October 26, 2023

Have you recently filed an insurance claim and been disappointed at the response you received? If so, you are not alone. More often than not, insurance companies delay, deny and even underpay claims, placing an undue financial burden on their policyholders and leaving them bewildered. And this tactic is not specific to one line of insurance coverage.

In fact, health, auto, disability, homeowners, and long-term care claims have a history of being delayed and/or denied.

This is confusing to many. When you enrolled in your insurance plan, you likely did so believing that, if you paid your premiums on time and in full, the insurance company would appropriately reimburse you for your expenses as outlined by your policy guidelines. It seems simple, right? Sadly, the world of insurance claim payment is rarely smooth sailing — in fact, the process can be downright complicated.

Why Do Insurance Companies Delay or Deny Claims?

Profits Are Prioritized Over Service

Every year, countless individuals face unreasonable delays in processing their insurance claims and many others receive the unwelcome and often devastating notification that their claim has been denied. If you count yourself among the many who have struggled in being reimbursed by their insurance company, then you know just how overwhelming the claims process can be.

Claims compensation can be considerable; these funds are necessary to pay outstanding bills or reimburse individuals for expenses they have personally satisfied.  The question of why claims are so frequently delayed or denied can be answered quite simply – insurance companies prioritize their bottom-line profitability over customer service. To state it simply, your insurance company does not have your best interests at heart.

It is important to recognize that insurance companies are businesses whose loyalties are to their shareholders – not to their customers. The premiums customers pay are recognized as revenues; they positively impact the profitability of the company. Insurance companies actively seek new business and are quick to bring on new policyholders.  Claims, on the other hand, are expenses which negatively affect the company’s bottom line. Thus, there is an incentive to reduce claim payments by delaying, underpaying or even denying them.

Why Would an Insurance Claim Be Delayed?

Truth Be Told: Time Really Does Matter

To some people, a delayed insurance claim payment is an inconvenience. To others, it can be life changing.  The funds these payments provide allow insurance company clients to repair or replace their property, pay their outstanding medical and care bills and protect their families’ financial health.  When claims are delayed, many find themselves unable to make necessary repairs to their homes or vehicles, and others see their astronomical medical bills continue to grow. Some are unable to receive the additional care they so badly need. Many simply don’t have the funds available to pay these expenses on their own, while those who do pay out of pocket see other aspects of their lives negatively impacted because there is less money for other expenses.

On the surface, it doesn’t make sense that insurance companies delay paying claims that they know they will ultimately be responsible for covering. It seems that paying them in a timely fashion would mean the business is operating efficiently.

 In reality, delaying claims is a tool that has long proved valuable for insurance companies.

Unfortunately, many individuals don’t follow up on their claims. Once they face delay, they simply believe that they will never be paid and that they have no recourse. Regrettably, they move forward assuming the financial burden as their own. Insurance companies know that this happens; when it does, they can avoid making payment and they never incur those expenses.

Additionally, insurance companies recognize significant interest income. The longer they can keep your claims payment in their accounts, the more interest they can earn.  So, even if they end up paying you the full amount in the end, they have saved money by slow rolling the process.

Finally, insurance companies are well aware that bad faith lawsuits happen. The Oklahoma statute of limitations for suing for bad faith is five years.  If your company stalls long enough, you may lose your right to sue for damages based upon their actions.

How Do Insurance Companies Delay Claims?

Their Options Are Considerable

Of course, reviewing an insurance claim takes time. It is understandable that insurance companies don’t blindly pay every claim in full, without question. Not everyone is honest in their submissions, and not every policy covers every circumstance.  Reviews by skilled professionals are both necessary and reasonable.

That said, insurance companies often unfairly delay claims. Among the things they do are:

• Develop complicated claims forms – This results in documentation being submitted with errors and then returned for correction, making the time to reimbursement even longer.
• Request unnecessary additional information – Requests for back-up information that is not really needed in the review process slows down payments.
• Assigning a new case manager – Every time a new person assumes responsibility for a claim, there is a learning curve that can be time consuming.
• Stalling claims investigations by adjusters (for property claims) – Property insurance claims require a visit by an adjuster to confirm total damage; claims cannot be fully processed until their reports are submitted.
• Asking questions in multiple calls/emails as opposed to all at once – Individual calls and emails asking endless questions require time-consuming communication, especially when each time you answer the company responds with another concern.
• Threatening non-coverage for future claims – Actions like this result in policyholders hesitating to move forward.

These bad faith actions are taken to slow the claims process and ultimately save the insurance company money. If your insurance company has exhibited these behaviors, you may want to contact an insurance attorney for advice and counsel.

Insurance Company Policyholders Can Take Action

The Law Is on Your Side

Throughout the state of Oklahoma specifically (and across the country in general), insurance company policyholders experience the delay of their claims each and every day. Their frustrations grow and the delays impact their financial well-being; yet they continue to wait for payment because they mistakenly believe that insurance companies are on their side.  Over time, a significant number of people forget about their claims, believing it’s simply not worth their effort to continue to call and email in pursuit of getting paid.

Still others receive notification that their claim will be only partially paid, or even denied, even though they believed they were entitled to the full amount they requested. Once again, insurance companies often underpay or deny claims in hopes that their clients will accept the response as final.

These actions historically have worked in the insurance companies’ favor, so they continue with them. You don’t need to accept this, however. Those experiencing delayed, denied, and underpaid claims do have recourse. Insurance companies are legally bound to provide a certain level of service.

How You Should React to a Delayed Insurance Claim

Once you have submitted your claim to your insurance company, there are steps you can take in response to their stalling. First, stay on top of the claim. This means that you must keep in touch, both by telephone and email. You should also consider following all phone calls with an email so there is a paper trail of your correspondence.

Make sure to request time frames for all responses to your questions. This provides you with information as to what to expect and also puts them on notice that you will be contacting them once again. If your communication goes unanswered, request to speak with a supervisor.  If the company is still non-responsive, you may want to contact an insurance bad faith attorney to help you move forward.

Each line of insurance (for example, property, health or auto) has legal time frames in which they must respond to claims. Your insurance lawyers can review your case and help obtain a settlement.

In many cases, once an attorney gets involved, insurance companies tend to move more quickly.

Your lawyer can negotiate on your behalf and help to close this chapter, maximizing your settlement and allowing you to put the matter behind you.

Contact Doug Terry Law Today

If you live in Oklahoma and are frustrated by a delayed insurance claim and need help in settling it, Doug Terry Law is ready to go to work on your behalf.  Mr. Terry has decades of professional experience in the insurance industry and a proven reputation for helping his law firm clients settle their cases and be reimbursed for damages as a result of insurance companies’ bad faith actions.

Time is valuable; you want to address stalled claims as quickly as possible.  We appreciate that the claims reimbursement is important to you and your family and will work tirelessly to help close this frustrating chapter of your life.  Contact us at 405-463-6362 to schedule a consultation; we will help you take control of what seems to be an uncontrollable situation.