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Postclaim Underwriting and the Verification of Insured Information: Evidence from the Life Insurance Industry

This research investigates information verification by life insurers with respect to postclaim underwriting through denied and resisted claims. We provide a theoretical model to explore the optimal strategy for insurers regarding preloss versus postclaim underwriting. Using differential cost structures, the model predicts that it is possible for some insurers to follow a strategy of postclaim underwriting while others do not. Evidence of this is found in the empirical analysis. Insurers that postclaim underwrite are identified by a decrease in underwriting expenses and an increase in the claim investigation expense in conjunction with increases in denied and resisted claims.