Strategic Claim Payment Delays: Evidence from Property and Casualty Insurance

Chotibhak Jotikasthira, Anastasia Kartasheva, Christian T. Lundblad and Tarun Ramadorai
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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

No 25-14, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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 (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2025-01
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2514

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