Why Do Insurance Companies Take So Long to Pay Out a Claim?

Insurance companies are often criticized for delays in paying out claims, leaving policyholders frustrated and financially strained. On average, in the United States, uncomplicated insurance claims are paid within 30 days.

However, more complex claims may take much longer. Some delays are unavoidable, but others are intentional efforts by insurance companies to avoid paying what is owed. If you have been in an accident and are waiting for your insurance company to pay your claim, you are not alone.

At Brown, Bass & Jeter, we tackle all personal injury claims and auto accident cases, and our experienced attorneys understand the difficulties that insurance delays can cause. That is why we’ve created this comprehensive guide that will help you understand the insurance claims process and shed light on why these delays occur and what you can do about it.

Insurance Claim Settlement Process and Its Time Limits

When you file an insurance claim, you expect a timely resolution so you can get your life back on track. However, the claim process can often feel like a waiting game, leaving you wondering when you’ll receive your payout. Understanding the process and the legal time limits involved can help you manage expectations and advocate for your rights as a policyholder.

Insurance Claim Settlement Stages

The insurance claim settlement process involves several stages, each with varying timeframes:

1. Claim filing: You notify your insurance company about the accident, providing details about the incident.
2. Investigation: The insurance company investigates the circumstances of the accident, gathers evidence, and interviews witnesses.
3. Evaluation: The insurer assesses the evidence to determine fault and calculate the compensation you’re entitled to under your insurance policy.
4. Settlement negotiation: If the insurer accepts liability, they may offer you a settlement, which you can negotiate with a lawyer to ensure it adequately covers your losses.
5. Payment or denial: The insurer either pays out the agreed-upon settlement amount or denies your claim, providing a written explanation if they deny it.

We will communicate with the insurance company on your behalf and work to arrive at a fair settlement.

How Long Is Too Long: Time Limits for Insurance Companies to Pay Out Claims

While the insurance industry aims to settle claims quickly, the exact time limit for payouts varies depending on the state you’re in and the complexity of your case. Most states have “prompt payment laws” that set specific time frames for insurers to acknowledge, investigate, and decide on claims.

These laws typically mandate that insurance companies:

• Acknowledge receipt of the claim: Within a specific timeframe (usually 15 days).
• Begin investigating the claim: Within a specific timeframe (usually 15 days).
• Issue a decision on the claim: Within a “reasonable” timeframe, which can be more vague.

While some states mandate strict timelines for claim handling, others are less specific. However, state law often doesn’t explicitly mandate a specific insurance payout time after a claim is approved.

The industry standard for insurance claim payouts is around 30 days. This means that in many cases, insurance companies will issue payment within about 30 days after you’ve filed your claim if it’s straightforward and doesn’t involve complex issues or disputes.

However, it’s important to note that this is just a general guideline, and some claims may take longer to resolve, even if they are not particularly complex.

Some states are known for faster processing than others. For example, in Mississippi or Florida, a straightforward car insurance claim can be resolved within 30 days, while in California, the average processing time can be closer to 45 days.

It’s crucial to understand these variations and the factors that can influence how long your claim takes to settle.

How Insurance Companies Pay Out Claims

The method by which insurance companies pay out claims can vary depending on the type of claim, the amount of the settlement, and the insurer’s internal policies. However, the chosen method can also influence the time it takes for you to receive your payment.

Here are some common methods:

Direct Deposit

This is a convenient and increasingly popular option, where the insurance company electronically transfers the settlement amount directly into your bank account. This method is usually the fastest way to receive payment, often taking only a few business days.

Check

Some insurers still issue paper checks, which are typically mailed to the policyholder’s address. This method may take longer due to processing and mailing time, potentially adding a week or more to the payout timeline.

Payment to a Third Party

In some cases, such as with car repairs or medical bills, the insurance company may pay the service provider directly. This ensures that the funds are used for their intended purpose and can streamline the reimbursement process. It may not directly impact the time it takes for you to receive compensation for other losses, such as lost wages or pain and suffering.

Factors Influencing Insurance Claim Delays

Numerous factors can contribute to a delay in the insurance claim process, some legitimate and others less so. Understanding these factors can help you manage expectations and potentially expedite your claim.

Complex Claims

Accidents involving multiple parties, disputes over determining fault, extensive property damage, and serious injuries naturally take longer to resolve. Investigating such insurance claims requires more time and resources, as the insurance company must gather evidence from multiple sources, interview multiple witnesses, and assess the complex interplay of liability among different parties.

Insufficient Documentation

If you fail to provide the necessary documentation to support your claim, it can significantly slow down the investigation and evaluation process. This includes medical records, repair estimates, car accident reports, and any other relevant information.

The insurance company needs this evidence to assess the extent of your damages and determine the appropriate compensation to offer you.

Understaffing

Insurance companies sometimes face staffing shortages, especially during peak periods or after major disasters. This can lead to backlogs in processing claims. While this is not an excuse for unreasonable delays, it’s important to understand that the industry is not immune to resource constraints.

Bad Faith Tactics

In some cases, insurers deliberately engage in delay tactics to avoid paying out claims or to pressure claimants into accepting lowball settlement offers. This is known as acting in bad faith and is illegal.

Examples of bad faith tactics include denying claims without a valid reason, failing to communicate with the policyholder on time, or making unreasonable demands for documentation.

If you suspect your insurance company is engaging in bad faith practices, it’s crucial to seek legal counsel from an experienced attorney. They can help you protect your rights and fight for the full compensation you are entitled to under your insurance policy.

How to Prevent Insurance Settlement Delays

While you can’t control every aspect of the claims process, there are proactive steps you can take to minimize the risk of obstruction and ensure your insurance claim is handled efficiently:

Report the Incident Promptly

Notify your insurance company about the accident as soon as possible — it’s one of the most important steps after an accident. Time is of the essence, as some insurance policies have specific time limits for reporting claims.

Provide Thorough Documentation

Gather all relevant evidence related to the accident. This may include photos of the scene, damage to vehicles or property, medical bills, police reports, and witness statements. The more documentation you can provide, the stronger your claim will be and the less room there will be for the insurer to deny or delay your claim.

Communicate Regularly

Stay in touch with your insurance adjuster and be responsive to any requests for additional information. Keep track of phone calls, emails, and other communications with the insurance company. This will help you stay on top of your claim and address any potential issues promptly.

Know Your Policy

Thoroughly review your insurance policy to understand your coverage limits, deductibles, and the claims process. This knowledge will empower you to ask informed questions and advocate for your rights as a policyholder.

Don’t Accept a Lowball Settlement Offer

If the insurer’s initial settlement offer seems unfairly low, don’t feel pressured to accept it. You have the right to negotiate for a fair settlement amount that adequately covers your losses. Consider consulting with an attorney to help you assess the value of your claim and negotiate effectively.

By following these tips and taking a proactive approach, you can avoid issues and increase your chances of a smooth and timely resolution to your insurance claim.

What to Do When Your Insurance Company Takes Too Long to Pay

If your insurance company is taking an unreasonable amount of time to process your insurance claim, you have options. Remember, insurance companies have a duty to act in good faith and handle claims promptly and fairly. If you feel they are not meeting the contractual obligations, you can take the following steps:

1. Contact the Insurance Company

Start by directly contacting your insurance adjuster or the company’s customer service department. Inquire about the status of your claim and the reason for the delay.

It’s crucial to keep detailed records of all communication with the insurer, including dates, times, and the names of representatives you speak with. This documentation can be valuable evidence if you need to escalate the matter further.

2. Escalate the Issue

If you’re not satisfied with the initial response or the delay persists, don’t hesitate to escalate the issue. Contact the insurance company’s claims manager or supervisor. Explain your concerns and request a specific timeframe for a resolution.

If you’ve experienced a motor vehicle accident, such as a truck accident or a motorcycle accident, for example, and your insurance claim payment is being delayed, emphasize the urgency of the situation and the impact it’s having on your life.

3. File a Complaint with the State Department of Insurance

If your efforts to resolve the issue directly with the insurance company are unsuccessful, you can file a formal complaint with the Mississippi Department of Insurance.

This state regulatory agency oversees the insurance industry and can investigate complaints against insurers. They have the authority to take action against insurance companies that engage in bad faith practices or violate state laws.

4. Seek Legal Counsel

If all else fails, consider consulting with an experienced insurance lawyer. They can assess your situation, review your insurance policy, and advise you on the best course of action.

They can negotiate with the insurance company on your behalf and, if necessary, file a bad faith lawsuit against the insurance company to recover the compensation you are entitled to after an accident. Sometimes, the mere threat of legal action can prompt an insurer to pay your claim more quickly.

Remember, you are not powerless when dealing with insurance companies. By being proactive, informed, and persistent, you can increase your chances of a timely resolution and receiving the payment you deserve.

When to Consider Legal Action for Insurance Claim Delays

While insurance companies have a legal obligation to act in good faith and process claims promptly, the definition of “prompt” can vary depending on state laws and the complexity of your claim.

In general, if an insurer takes significantly longer than the average turnaround time for your type of claim or fails to communicate effectively, it may be time to consider legal action. Here are some signs that your insurance company might be unreasonably delaying your claim:

Excessive Delay

If your claim has been pending for an extended period without a clear explanation, it could indicate a problem. If your insurer is exceeding reasonable expectations or industry standards for your type of claim, it’s worth investigating further.

Lack of Communication

Insurance companies should keep you informed about the progress of your claim. If your adjuster is unresponsive or fails to provide regular updates, it could be a red flag.

Unreasonable Demands

Insurers may request additional documentation to support your claim, but these requests should be reasonable and relevant. If you feel your insurer is making excessive or unnecessary demands, it might be a delay tactic.

Don’t Let Insurance Companies Delay Your Recovery — We’ve Got You Covered

Insurance claim delays can be frustrating and financially draining, but you don’t have to navigate the claims process alone. If you think that your insurance company is delaying your insurance claim unfairly, it’s time to take action.

At Brown, Bass & Jeter, a personal injury law firm, our experienced attorneys are dedicated to helping accident victims get the compensation they deserve. If you’re struggling with your insurance claim after an accident, don’t hesitate to contact us for a consultation. We’ll review your case, explain your options, and help you get your life back on track.