Author of “Delay, Deny, Defend”: Fixing the Insurance Sector to Calm American Anger

By Jay Feinman

Anger against insurers goes beyond health coverage

Insurance companies delay paying some claims, completely deny other valid claims, and force policyholders to defend themselves in court – all to increase their profits.

My book “Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It” was thrust into the spotlight recently, after UnitedHealthcare (UNH) CEO Brian Thompson was killed by bullet in what authorities say was a targeted attack outside the company’s annual investor conference on Dec. 4. Investigators at the scene found bullet casings bearing the words “delay,” “deny” and “drop.”

The unsettling resonance of the book’s title struck me and many others.

That killing — and the torrent of online outrage that followed — brought Americans’ dissatisfaction with health insurers to the forefront of the national debate. Many people responded not by mourning Thompson, but by blaming UnitedHealthcare and other insurers for failing to pay for essential medical treatments. Merry online trolls even celebrated the alleged killer as a heroic vigilante.

As an insurance expert, I think few people should be surprised by this grisly reaction. The killing exposed the resentment, even rage, that many Americans feel toward insurance companies. And while the focus has been on health insurance, these frustrations extend across the entire insurance landscape. Homeowners insurance, for example, is becoming increasingly difficult to obtain in many states, even as coverage declines and auto insurance rates also skyrocket. These trends are fueling widespread discontent with insurers of all stripes.

Why do policyholders feel betrayed?

Policyholders are particularly outraged when insurers fail to keep their promises to pay claims quickly and fairly.

As many recent news stories about health insurance denials show, policyholders are particularly outraged when insurers fail to keep their promises to pay claims quickly and fairly.

And as I read people’s stories about their own experiences, I heard echoes in my book. Too often, people say, insurance companies delay paying some claims, deny other valid claims outright, and force policyholders to defend themselves in court – all to increase their profits by reducing claims costs.

But problems often start long before anyone files a claim. Insurance consumers generally don’t know much about what they’re buying. For homeowners insurance, auto insurance, and many other types of insurance, companies rarely provide copies of the policy text or accessible summaries of policy terms to potential policyholders.

Even when consumers have access to policies, many do not read or cannot understand the lengthy and complex legal documents. Likewise, they cannot anticipate the many ways a loss could occur or the problems that could result. As a result, they only know a few key terms and believe they will be “in good hands” with a “good neighbor,” to cite two of the iconic phrases of insurance advertising.

Then, when consumers need coverage, they discover that there are significant gaps in protection. Health insurance can involve a tangle of limitations due to provider networks, medical necessity rules, and prior authorization requirements. Homeowners reasonably expect to be fully covered for any significant losses, but insurers have reduced their coverage to account for rising costs due to inflation and climate change.

As a result, when disaster strikes, too many Americans feel like they don’t have the security they paid for.

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An Insurance Industry Americans Can Trust

Insurance is the great protector of the financial security of the American middle class – but only when it works.

Restoring trust in insurance won’t be easy, but it is essential. Insurance is the great protector of the financial security of the American middle class – but only when it works. As the recent reaction demonstrates, it needs to work better. The insurance industry will not change on its own; the financial pressures on insurers resulting from increasing losses and fierce market competition are too great.

For insurance to achieve its goals, lawmakers and regulators will need to act. Based on my research, I see three major areas for improvement.

First, the government can help improve the functioning of the insurance market. Markets need information, and better information produces better results. Regulators should require that key coverage information be available in an accessible format for all insurance types.

Consumers also need information about the quality of companies offering insurance policies, and a key measure of quality is whether a company pays claims quickly and fairly. Consumers do not have access to much reliable information on this topic at present, which is why disclosure should also be mandatory in this area.

Second, states would do well to consider minimum coverage standards, particularly for homeowners insurance, as insurers have recently reduced coverage to reduce costs. New York solved a similar problem in 1943, legislatively adopting a standard fire policy, since copied in many states.

Some 70 years later, the Affordable Care Act did something similar by requiring insurers to cover 10 essential health benefits. In both cases, lawmakers set minimum standards that every company must meet. States must once again ask themselves whether insurance coverage is too important to be left to the vagaries of the market alone.

Third, policyholders need effective remedies when insurance companies are found to have acted unreasonably. Many insurance claims result in good faith disputes over how much the insurance company must pay – for example, whether the roof damage was caused by hail, which is usually covered by insurance, or if they are the result of wear and tear, which is not. But other times, insurance companies deny claims after inadequate investigations or for false reasons.

For example, a 2023 Washington Post investigation concluded that following Hurricane Ian, some Florida insurance companies aggressively sought to limit payouts by changing the work of their adjusters who inspected damaged houses. Some policyholders and their families saw their Hurricane Ian claims reduced by 45% to 97%. The American Policyholder Association, a nonprofit insurance industry watchdog group, said it found “compelling evidence of what appears to be multiple instances of systematic criminal fraud perpetrated to deceive policyholders and deprive them of fair insurance claims.”

When people find themselves in this kind of situation, they have to spend a lot of time and effort fighting to get what is owed to them in the first place. Even when an insurance company finally gives in, it still hasn’t kept its original promise to the policyholder to settle claims quickly and fairly. In these cases, requiring additional compensation from policyholders and deterring insurers from unreasonable conduct would level the playing field.

The deep resentment many Americans feel toward insurance companies became evident after the assassination of Brian Thompson. Reforms like these would be a significant response to this resentment.

Jay Feinman is professor emeritus of law at Rutgers University and author of “Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It.”

This article is republished from Conversation under a Creative Commons license. Read the original article.

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-Jay Feinman

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