CFA: The homeowner insurance industry makes $8.8 million in interest for every day they delay
The homeowners insurance industry collectively makes an extra $8.8 million in interest and investment income for every day it delays a claim payment, according to an analysis released by the Consumer Federation of America (CFA) in partnership with Weiss Ratings.
If claims are not issued until one week after the insurer should have paid, the industry collectively gains $61.6 million, a news release says. During this time, consumers feel stressed and experience financial hardship, waiting for their claim checks to arrive.
“Insurance companies cancel us if we are late on a premium payment, but when they are late on a claim payment, they make money,” said Douglas Heller, CFA’s director of insurance, in the release. “Instead of incentivizing insurers to delay claims, there should be consequences. The customer waiting for their claim to be paid, not the company causing the delay, should earn the interest that accumulates.”
Weiss Ratings, an independent financial institution rating firm, found that U.S. property and casualty insurance companies averaged about $241 million in investment income every day in 2024. About $24.7 million of that income can be attributed to the homeowners insurance premiums and surplus that the companies invest.
Across all lines of property and casualty insurance, the industry earned a combined $52.3 million in investment income for each additional day claims are delayed.
CFA notes that delayed payments on insurance claims represent the single largest complaint category recorded in the National Association of Insurance Commissioners (NAIC) database. It represented 22% of the nearly 65,000 complaints received by state insurance commissioners in 2025.
For example, the California Department of Insurance found 27 instances in which State Farm failed to pay its policyholders within 30 days after the 2025 Los Angeles wildfire. The instances were found in a sample of 220 State Farm claims that the department reviewed.
California is currently considering legislation, SB 878, that would require insurers to pay interest to policyholders if residential property claims are not paid within 30 days of meeting certain claims handling thresholds. This includes the insurer’s acceptance of all or part of the claim or after it is determined that the property is a total loss.
A separate Weiss Ratings report, released late last year, found that, on average, insurers in 15 disaster-prone states delayed payments for homeowner’s claims for 60 days or more on 28.1% of claims in 2024.
“This is just one of six tactics insurers are using to stiff homeowners,” said Weiss Ratings Founder Martin D. Weiss in a press release. “Other tactics include closing over 42.1% of homeowner claims with no payment, up from 25.7% in 2004; cutting claims payments to the bone; surplus line price gouging; and lobbying hard for tort reform that makes it much harder for consumers to get satisfaction in court.”
The Wall Street Journal (WSJ) recently published an analysis that found insurance companies didn’t pay 45% of auto liability and medical claims resolved last year. The rate has increased from a decade ago, up from 35%, the article says.
CFA says that the insurance industry is built on a financial model that relies on investment income as its primary source of profit.
“The ratio of premium dollars received by insurers compared with money spent on claims and business administration is roughly 1:1 over time, but because premiums come in well before claims payments are made, companies earn their profit by investing the premium dollars (and additional surplus they build up over time),” the release says.
The release points to comments made by Warren Buffett in 2008 about why he found the insurance financial model appealing.
“This means that our $58.5 billion of insurance ‘float’ – money that doesn’t belong to us but that we hold and invest for our own benefit – cost us less than zero,” Buffett says in a 2008 letter to shareholders. “In fact, we were paid $2.8 billion [the insurers’ underwriting profit that year] to hold our float during 2008.”
Heller adds in the CFA release that the insurance business model is built on the investment opportunity in the period between premium inflow and claim payment outflow.
“That creates a perverse incentive for insurers to increase the time before paying a claim in order to squeeze extra income out of the policy,” Heller says. “Removing that incentive, by requiring insurers to pay interest on claim delays would not only serve to hold insurers accountable to standards of good faith and fair dealing, it would make it easier and faster for people to begin the process of rebuilding their lives after a disaster.”
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