Not surprisingly, one of the core consumer protection issues in insurance is ensuring that carriers pay claims fairly and expeditiously. Unlike many contracts, insurance policies are sequential and contingent: whereas the policyholder performs routinely by paying premiums, the insurer performs by paying a claim if, and only if, a loss occurs. This dynamic creates special risks of unfair business practices. These risks are enhanced by the fact that many insurance policies (outside of the life insurance context) necessarily rely on abstract language to describe insurers’ coverage obligations. For these reasons, much of insurance law – including the availability of bad faith lawsuits and state prohibitions on “unfair claims practices” – is devoted to ensuring carriers’ fair payment of claims.
Despite the centrality of claim-handling to consumer protection in insurance, regulators do essentially nothing to promote transparency in insurance markets with respect to this issue. The reason is not that it would be particularly difficult to measure this variable: useful metrics might include how often claims are paid within specified time periods, how often claims are denied, how often policies are non-renewed after a claim is filed, and how often policyholders sue for coverage. In fact, state regulators already collect some of this data for their own use in policing the market place. But none of this data is systematically made publicly available to consumers. Rather, this information is generally treated as confidential on the basis that it could reveal proprietary company information or mislead insurance consumers.