By Sean Dilweg, Former Wisconsin Insurance Commissioner

A new bipartisan inquiry from Senators Elizabeth Warren and Josh Hawley is focusing attention on a deceptively simple insurance statistic: the percentage of claims that are closed without payment.

The senators have asked several of the largest home and auto insurers for information about claims that end without a payment to the policyholder, following reports that the share of such claims has increased materially over the past decade. That is a legitimate issue for regulators and policymakers to examine. But before “closed without payment” becomes shorthand for “claim denied,” it is worth understanding what the term actually means.

A claim that closes without payment is not necessarily a denied claim. That distinction is more than semantics. It goes to the heart of how insurance regulators evaluate claims data and how carefully we should interpret broad statistics about insurer behavior.

The National Association of Insurance Commissioners uses the Market Conduct Annual Statement, or MCAS, to collect standardized information about insurer practices. One of the measures reported is the number of claims closed with and without payment. But the “without payment” category includes more than outright claim denials.

Take a straightforward example. A homeowner has a $5,000 deductible and reports $3,500 in covered storm damage. The insurer can investigate the claim properly, conclude that the loss is covered, communicate its findings clearly, and still issue no payment because the loss falls below the deductible. That claim is recorded as closed without payment.

Nothing about that fact, by itself, suggests improper claims handling.

The same category can include claims involving exclusions, duplicate submissions, withdrawn claims, situations in which another insurer is responsible, or cases where the policy simply does not provide coverage for the claimed loss. Those circumstances are very different from an insurer improperly refusing to pay a covered claim.

That is why I would be cautious about drawing conclusions from the raw percentage alone.

At the same time, insurers should not be too quick to dismiss the congressional inquiry as a misunderstanding of the data. If the percentage of claims producing no payment has risen materially over time, that is precisely the kind of trend a regulator should investigate.

The question is not simply, “How many claims were closed without payment?”

The better question is, “Why?”

That is where market-conduct analysis begins.

An insurer with an unusually high nonpayment rate should be able to explain what sits behind the number. How many claims fell below deductibles? How many involved exclusions? How many were withdrawn? How many were formally denied? Were there meaningful changes in claim mix, deductibles, underwriting, catastrophe exposure, or policy terms?

Then comes the more important step: reviewing the underlying files.

Were claims investigated promptly? Were insureds kept informed? Were relevant documents obtained? Were estimates supported? Were exclusions applied consistently? Were denials adequately explained? Were files reopened when new information emerged? Did supervisors review unusual decisions?

Those questions tell us far more about claims practices than a single percentage ever could.

Having worked as an insurance regulator and now in insurance-related expert matters, I view claims statistics much like financial ratios. They are useful screening tools. They tell you where to look. They rarely tell you the whole story.

A high number may indicate a serious problem. It may also reflect higher deductibles, different claim populations, more noncovered losses, or other legitimate factors. The data creates the question. The claims files provide the answer.

The senators are also asking about employee incentives and whether compensation practices may be tied to claims outcomes. That inquiry is equally important.

Insurers necessarily measure claims performance. They track cycle time, severity, customer satisfaction, productivity, litigation, reserving accuracy, and many other measures. There is nothing inherently improper about managing those metrics.

The regulatory concern arises when a performance system creates pressure to reduce legitimate payments, shortcut investigations, or discourage adjusters from fully evaluating claims.

That is not merely a compensation issue. It is a governance issue.

A regulator looking at such a system would want to understand what metrics are used, how employees are evaluated, what discretion adjusters retain, how supervisors review exceptions, and whether management tests for unintended consequences. A well-designed claims organization should be able to demonstrate that efficiency and cost control do not come at the expense of fair claim evaluation.

This inquiry is arriving at a particularly sensitive time for the insurance industry.

Consumers are already confronting higher premiums, larger deductibles, tighter underwriting, and reduced availability in catastrophe-exposed markets. That creates a credibility problem if those same consumers also believe insurers are increasingly unwilling to pay claims.

The industry therefore has a strong interest in explaining the numbers clearly and with evidence.

Simply saying that “closed without payment” is being misunderstood will not be enough. If the increase is driven by legitimate factors, insurers should be able to show that. If the data instead reveals delayed investigations, unsupported denials, inconsistent application of policy provisions, or excessive pressure on claims staff, regulators should be able to identify that as well.

The danger is reducing the issue to competing slogans.

One side says that a high percentage of unpaid claims proves insurers are unfairly denying coverage.

The other says that the number includes deductible claims, so there is nothing to worry about.

Neither position is particularly useful.

The better approach is the traditional regulatory one: identify the anomaly, determine what is driving it, and test the explanation against actual claims files.

Congress has identified a number worth examining.

Now comes the harder and much more important part: finding out what that number actually means.

In insurance regulation, that almost always requires moving beyond the spreadsheet and into the claims file.