Unanticipated Problems – Delayed Insurance Payments Mean All Work and No Pay

I was talking with the employee of a small business the other day, and he told me that something unanticipated happened after the California wildfires – 1) his business was so busy with the rebuilding of homes that they couldn’t keep up with the work, and 2) because the rebuilds were funded by homeowner’s insurance, the payments for their work was SO slow that the company nearly went out of business.

Home Rebuild in Tubbs Fire Zone (taken by Lauren Sommer, KQED)

Here we have discovered yet another problem with the lack of strict regulation of insurance claims in the United States. When insurance companies regularly delay claim payments by numerous months and even YEARS, they are causing hardship not just for the homeowner, but for the vendors the homeowner hires to do the rebuilding work. This may not be a problem for large companies with diverse service areas, but for a small company servicing primarily the area that was hit by the disaster, the insurers’ delayed claim payments can put them out of business entirely while they wait to be paid.

Why do insurance companies process claims so slowly? The prevailing reason is because the longer they keep the claim money in their bank account, the more interest it accrues and the richer the company becomes. This may not seem like a big deal for each individual claim, but insurers are so large today that those numbers add up very fast, and soon they are keeping millions in interest. While they make millions of dollars of interest for their shareholders, small businesses are struggling to keep afloat. This is an injustice that needs to be fixed.


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