Why Does It Take Insurers So Darn Long to Pay Claims? An Insurance Expert Explains

A car has struck another car's rear bumper.

You are likely to hear this question, or a variation, at some point in your life: Why won't the insurance company pay my claim?

Turns out, the answer to that question can be as complex at times as answering the question, What's the meaning of life?

OK, maybe that isn't a fair comparison, but still. So let's talk about it.

With an insurance policy, it starts out easy. You call an insurance agent or broker, or even visit them, or you talk with an insurance company directly and get the answers to your questions. Everything is peaches and cream.

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Then you purchase the policy, and things are still pretty clean. You get a bill, you pay the bill. Rinse, repeat. This can go on for years. You're fulfilling, at least in part, your part of the insurance contract, the agreement between you and the insurance company.

You've done your part

You've already fulfilled other obligations for your part of the arrangement, such as filling out and signing an application, being honest with your answers and working with the company in good faith, the best you can. You've done it all.

Then something happens. That fateful day comes, and you have a loss. For simplicity's sake, let's use an auto accident as an example, since most of us, sadly, are familiar with car accidents.

Say you're involved in an accident — that luckily is not bad — and a few hours later, you file the claim with your insurance company on the phone or online.

Now they just cut the check, right? Just like you were writing checks, right? Well, not exactly.

What the insurance company has to do

While you've done your part in this scenario, which is actually pretty simple, what the insurance company has to do is infinitely more complicated.

First, they need to verify you have a policy with them. Then they need to check to see if the accident actually happened. (Yes, this is a thing.) Then they need to get the facts about the accident from all parties involved.

This means they want to talk to your passengers as well as the other driver and their passengers. There may also be the need to speak with eye witnesses to get a clearer picture of what actually transpired. Who was at fault for this accident?

We want to be sure that the accident is investigated as thoroughly as possible, since the other driver will rarely fall on their sword and say, "Yeah, sorry, mate. My bad."

What else they have to do

While this is happening, the insurance company also has to deal with the costs to repair the involved vehicles. That means they have to get eyes on them. Perhaps they'll ask you and the other driver to upload photos on an app, or maybe a claims adjuster or a body shop takes a look at the actual cars.

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Guess what else? The other driver says he was injured and can't work, so he wants your insurance company to pay him for pain and suffering. That's going to mean, possibly, competing opinions from doctors.

There is more, but I think you get the idea. The insurance carrier has a boatload of stuff they need to deal with that we, as consumers, don't. That's literally what we pay them for. And they will do it.

Unfortunately, this stuff takes time — sometimes much longer than we would like it to. But we need them to do all of this — it is their job and their contractual obligation.

Do we wish they could write us a check as fast as we write them? Yes. Is it possible to be fast about it when they have a lot of details to weed through? Sadly, no.

Want to learn more about insurance? Visit KarlSusman.com.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.