Why Do Insurance Companies Delay Settlements?

November 6, 2022

“My insurance company protects me.”  Of course, most people believe this. Isn’t it the premise upon which insurance companies operate? If so, then why do insurance companies delay settlements?

Individuals in Oklahoma and across the country have faith that the companies which insure their health, their cars, their businesses, and their property have their best interests at heart.  Unfortunately, this is not always the case.

The loyalty of insurance agents and representatives is to the companies that employ them, and to their management and shareholders — not to you.

All of their actions are based on the bottom line. Insurance companies, regardless of the types of coverage they provide, are businesses. And, just like any other business, their primary goal is to make as much money as possible. Thus, paying you appropriately and quickly is often not in their best interest.

If you have filed a claim with your insurance company and have had it delayed or denied, an insurance lawyer can help you get the settlement you deserve. Contact Doug Terry Law, a firm with in-depth experience today, at 405-293-3541.

Why Do Insurance Companies Delay Paying Claims?

Insurance Companies are Businesses

Each and every business, regardless of the industry in which it operates, shares the ultimate goal of profitability. They want to make as much money as they possibly can. Achieving this goal allows them to reward their stockholders, their management, and their employees. Even those businesses whose services and products “do good” must turn a profit to operate.

To make money, companies must maximize their revenues while minimizing their expenses.  It’s just basic math. When the money it brings in exceeds what it costs to operate, a company is profitable.

Insurance companies are no different. While what they sell — protection for your life, health, and belongings — provides you comfort … make no mistake; their priority is  protecting their bottom lines.

Insurance Claims Can Be Costly

If you have filed an insurance claim, you are looking for reimbursement for your expenses and possibly compensation for your experience. These claims, regardless of the type, can be expensive. Components of the claims depend upon the existing situations. Insurance claims can be filed for several different reasons, including:

• Automobile accidents
• Disability
• Health and medical issues
• Homeowners damage
• Long-term care needs.

Whether the insurance claim is the result of negligence (like malpractice or a workplace accident) or simply “life happening” (fire, illness, damage due to inclement weather), the costs involved can be staggering and the reimbursement period can be exceedingly long. You may wonder if you will ever be compensated.

How Insurance Companies Delay Claims

Common sense says that once you file your insurance claim the company should quickly investigate and then provide compensation. Isn’t efficiency cost-effective?

When it comes to insurance claims, the answer is no. The process for reimbursement is intentionally complex. The time it takes, from beginning to end, is designed to benefit the company, and delaying the process does just that.

There are specific points in the insurance claims process where it is easy for the company to slow things down. Some of their strategies can include:

• Requesting extensive backup documentation and information
• Delaying responses to questions and filings
• Ignoring communications, resulting in a total loss of contact.

These actions extend an already time-consuming process, making the situation even more difficult for you, the client. Emotions run high when claims are filed; the financial need is very real. The expected insurance funds are often used to pay for medical treatment and auto, home, and property repairs. By delaying communication and payment, Insurance companies hope that you will accept a lesser settlement out of frustration, ultimately saving the company money.

The Benefit of the Delay

It is important to realize that if expediency were positively correlated to profit, claims would be processed quickly; only pertinent information would be requested; and negotiations would be addressed in a timely fashion. The fact that quite often none of these processes are followed reinforces the truth: Delaying claims is good business for insurance companies.

In the insurance industry, often what appears to be inefficiencies are instead deliberate processes designed to increase the business’s net income by decreasing its expenses, i.e., your financial claims.

Delaying insurance payments and slow rolling the claims process…

• Encourages Action: Let’s face it if you have filed an insurance claim, you have expenses you have either paid in advance or need to pay with the settlement you plan to receive. Realistically, how long can you wait for your money?

From experience, the insurer knows that many people will accept less than they are entitled to for the entire process to conclude.  As people wait, continue to provide information and answer questions, they grow restless. Often, they become concerned and wonder whether they will ever see any compensation.  A significant percentage end up accepting a settlement that could have been greater had they had more patience and appropriate legal guidance.  Additionally, in personal injury cases, the Statute of Limitations in Oklahoma is two years from the date of the incident. Delays can affect the ability to recover damages because of this deadline, once again saving the insurance company money.

• Increases Interest Income: Year after year, millions of people pay their insurance premiums.  These monies are invested by the companies and a portion each year is used to pay claims. The longer the insurance companies have the money invested, the more interest income they earn.  Thus, delaying payouts is a profitable business strategy.

You can clearly see why it makes sense for insurance companies to move slowly. The benefit of fast-tracking is virtually non-existent.

Knowledge is Power: Protecting Yourself During an Insurance Claim

Be Smart

Depending upon the type of insurance purchased, most of us believe, or at least hope, that we will never need to use it. Thus, when selecting which company to use, we often base our decision solely on the coverage terms and related pricing.

While both are important factors, it is also wise to consider the reputation of the company with which you will work. Are they known for their customer service? Or do they have a reputation for being difficult? While there is a great deal of information about these organizations online, it also makes sense to seek recommendations from those you know.

Keep in mind that asking the opinion of someone who has never made a claim may not be particularly helpful. In all likelihood, they have never had a reason to be unhappy.  Insurance companies and agents love customers who pay their premiums on time and never make claims.

Talk to individuals who have filed claims to better understand their experiences. 

Can You Sue an Insurance Company for Delaying a Claim?

If your insurance claim seems to be taking an exceedingly long time to settle, you may be entitled to compensation under Oklahoma law regarding unfair claims settlement. Insurance policies are contracts, and certain basic timelines are outlined by the Oklahoma Insurance Department.

If your attorney is able to prove your bad faith claim, you may be eligible for compensation.  Damages awarded may include:

• Contract damages: what you are actually owed, based upon the terms of your policy
• Compensatory damages: a settlement to compensate you for your experience (emotional distress, financial hardship, humiliation, anger, and embarrassment)
• Punitive damages: monetary penalties designed to punish the company for its behavior and to deter it from similar actions in the future.

Awards will vary, based on the details of your case. Based on experience, an Oklahoma insurance attorney can provide guidance on what you can expect to receive.

Consulting an experienced insurance lawyer should be your first course of action if you believe your insurance company is acting in bad faith. An attorney can review your situation, determine whether you have a viable case, and advise you on your options moving forward.

Get Help from Doug Terry if Your Insurance Company is Delaying Settlement

If you believe you are a victim of bad faith insurance practices, Doug Terry Law can help. Focusing on insurance law, the firm has decades of experience helping clients obtain the insurance settlements they need and deserve.

Doug Terry understands the ins and outs of the insurance industry as well as the laws governing it in Oklahoma. He can answer the often-asked question of “why do insurance companies drag out clams” and can support you in your quest for the compensation you deserve. An experienced and effective litigator, Doug Terry is dedicated to supporting individuals who have been wronged by their insurance companies. Contact Doug Terry law today at 405-293-3541 and learn how he can help you.