Setting the Record Straight: Insurers Have a Long History of Fulfilling Promises to Policyholders and Paying Covered Claims

Insurers are deeply committed to their mission of helping people put their lives back together in their time of need and are dedicated to processing claims quickly, accurately, and fairly, but a recent Wall Street Journal article on home insurance claims closed without payment uses a sensational headline that risks leaving readers with the false impression that insurers routinely fail to pay valid claims. That characterization is far from the truth. Over the last five years, homeowners insurers have paid more than $475 billion in claims.

FACT: A claim closed without payment does not mean insurers are wrongfully denying claims. There are a variety of reasons why a claim may be closed without payment, including:

1. The Cost of Damage Falls Below the Deductible

This is one of the most common reasons for a claim to be closed without payment.

• The adjuster confirms a covered loss occurred, but repair costs are less than the deductible. Therefore, no payment is issued, but the claim is not denied.
• For example, wind causes $800 in damage, but the deductible is $1,000.

Big Picture:

• With insurance costs rising, some policyholders are opting to increase their deductible as a way to lower their monthly premium costs.
• Improved building codes and stronger construction standards in many states, like Florida, have resulted in stronger homes and less damage, which can lead to claims falling below the deductible. This is not a denial. If additional damage is found during the repair process, the policyholder can usually reopen the claim within the statutory or contractual timeframe.

2. The Damage is Not Covered

A policyholder may file a claim for damage that is not covered by the homeowners insurance policy, such as flood damage.

• This is a common issue after large-scale natural disasters, like hurricanes, atmospheric rivers, and extreme inland rainfall, that bring storm surge and flooding.
• If the damage is not covered by the homeowners policy, the claim is closed without payment.

Big Picture: Flooding is the most common disaster in the U.S., but only 4% of homeowners have flood insurance. This creates a huge gap between coverage and risk and leaves many families financially vulnerable.

3. There is No (or Insufficient) Damage

Sometimes a policyholder submits a claim and the adjuster finds:

• No physical damage.
• Damage unrelated to the reported event.
• Wear and tear or pre-existing issues (but without issuing a formal denial).

The policyholder may simply accept the finding, and the claim is closed with no payment.

4. The Claim is Withdrawn by the Policyholder

A homeowner may withdraw the claim after filing it because:

• They decide to pay for repairs themselves.
• They are concerned about the impact on their premium.
• Contractor quotes come in lower than expected.
• The claim was opened in error.

Once withdrawn, it must still be recorded as closed without payment, not denied.

5. There is a Lack of Required Documentation or Inactivity to Process the Claim

An insurer may administratively close the claim for inactivity if the policyholder does not:

• Provide proof of loss.
• Submit repair estimates.
• Respond to requests.
• Allow inspections.

This is not a denial. The policyholder can usually reopen the claim within the statutory or contractual timeframe.

6. The Policyholder Elects Not to Complete Repairs

Some policies require:

• Actual cash value (ACV) payment first.
• Replacement cost value (RCV) paid after repairs.

If ACV is below the deductible or the policyholder declines to repair, the claim closes without payment.

7. The Claim is Filed for "Information Only"

Some policyholders file a claim to:

• Ask if damage is covered.
• Establish a record of a weather event.
• Consult about potential roof damage.

If they choose not to proceed, the claim closes with no payment.

8. FEMA Requires a Denial Letter When Applying for Disaster Assistance

If a homeowner is applying for disaster assistance through FEMA, they are required to have a denial letter from their homeowner insurer in order for FEMA to provide financial assistance.

• This can artificially inflate claims data to create the appearance of widespread denials by insurers.

Big Picture: More frequent and severe natural disasters (hurricanes, floods, wildfires, severe convective storms) increase the number of people affected and eligible for disaster assistance.

FACT: Claims handling practices are rigorously governed by state laws and regulations. Consumers have recourse through their state department of insurance if they feel their claim is not being handled fairly.

• Insurers operate under robust state oversight, with insurance departments enforcing strict market conduct standards.
• State insurance departments conduct regular audits, investigate consumer complaints, and have the authority to require corrective action.
• For example, the Florida Office of Insurance Regulation (OIR) conducted an intense review of claims closed without payment after recent hurricanes and found no evidence of companies refusing to pay valid claims.The OIR found that the top reasons for claims closed without payment are the claim damage was below the insurance policy's deductible, or that the claim was denied due to flood damage that is not covered by the property insurance policy.