An Analysis of Rejected Homeowner Insurance Claims in the United States

Executive Summary

The United States homeowner insurance market is confronting a period of significant strain, characterized by escalating costs, shrinking availability in high-risk areas, and a growing chasm of trust between insurers and policyholders.

At the heart of this tension lies the issue of rejected claims.

This report provides an exhaustive analysis of homeowner insurance claim denials, revealing a market defined by a critical and widening data transparency gap.

Within a fragmented, state-based regulatory system, the absence of publicly accessible, standardized data on claim outcomes obscures a rising trend of rejections.

This trend is particularly acute in states vulnerable to climate-driven catastrophes, such as Florida, Texas, and California.

The investigation finds that claim denials are not a monolithic issue but are driven by a complex interplay of factors.

These include legitimate and clearly defined policy exclusions, an increasing procedural burden placed on policyholders to document and file claims, and profound economic pressures on insurers stemming from construction cost inflation and unprecedented catastrophic losses.

The analysis of available third-party data, while contested by the industry, indicates that the rate of claims closed without payment has risen substantially over the past two decades, with some major national insurers closing nearly half of all filed claims without issuing payment in certain jurisdictions.

This report dissects the regulatory framework that fosters this opacity, examines the conflicting data narratives, provides a detailed taxonomy of denial rationales, and offers a strategic guide for consumers navigating the appeals process.

The findings carry significant strategic implications for all market participants.

For policyholders, the practical value of their insurance is diminishing as deductibles rise and the claims process becomes more arduous.

For regulators, the lack of transparent data hinders effective market conduct oversight and erodes public confidence.

For the insurance industry, the current trajectory of rising rates and perceived claim intransigence risks long-term reputational damage and invites more stringent legislative intervention.

Ultimately, this report concludes that a fundamental shift toward mandatory, standardized public reporting of claim data is necessary to restore balance, accountability, and trust in this essential financial market.

I. The Regulatory Labyrinth: Oversight of Homeowner Insurance in the United States

The landscape of homeowner insurance regulation in the United States is a complex patchwork of state-level authorities, with a deliberately limited federal role.

This structure is the direct result of a 150-year history of legal and legislative decisions that have cemented the primacy of individual states in overseeing the insurance industry.

Understanding this framework is critical to comprehending why data on claim denials is so fragmented and difficult to obtain.

A. The Primacy of State Control: The McCarran-Ferguson Act and Its Legacy

The foundational legal principle governing U.S. insurance is the delegation of regulatory authority to the states.

This principle was codified in the McCarran-Ferguson Act of 1945, a pivotal piece of legislation that continues to shape the industry today.¹

The Act was passed by Congress in direct response to a period of legal uncertainty.

For decades, the prevailing view, established in the 1868 Supreme Court case

Paul v.

Virginia, was that insurance did not constitute interstate commerce and was therefore not subject to federal regulation.

This precedent was overturned in the 1944 case U.S. v.

South-Eastern Underwriters Association, which found that insurance transactions across state lines did, in fact, fall under the category of interstate commerce, opening the door to federal oversight and antitrust enforcement.¹

Concerned that federal intervention would disrupt established state-based systems, Congress acted swiftly.

The McCarran-Ferguson Act explicitly declared that the continued regulation and taxation of the “business of insurance” by the several states was in the public interest.

It also provided a limited federal antitrust exemption for insurance industry practices, so long as they were regulated by state law.¹

The enduring consequence of this legislation is a regulatory system devoid of a central federal authority for insurance, in stark contrast to the banking and securities sectors, which are overseen by entities like the Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC), respectively.¹

Instead, each of the 50 states, along with the District of Columbia and U.S. territories, maintains its own department of insurance or equivalent agency.

These state bodies are vested with the comprehensive power to charter and license insurance companies, regulate their financial solvency, approve policy forms and rates, and oversee the market conduct of both companies and agents.¹

This includes the crucial power to investigate consumer complaints and sanction companies for engaging in unfair practices, such as the improper denial of claims.²

B. The National Association of Insurance Commissioners (NAIC): A Coordinator Without Command

While regulation is executed at the state level, the system is not entirely balkanized.

The National Association of Insurance Commissioners (NAIC) serves as a vital coordinating body.

Established in 1871, the NAIC is an association of the chief insurance regulators from all states and territories.³

It is crucial to understand that the NAIC is not a federal regulator and possesses no direct authority to enforce laws or regulate companies.¹

Its primary function is to serve its members—the state regulators—by providing a forum for the development of uniform public policy where appropriate.³

The NAIC’s most significant output is a series of model laws and regulations.

These models, covering topics from solvency standards to market conduct, can be adopted in whole or in part by state legislatures, creating a degree of standardization across the country.³

This function helps mitigate some of the inefficiencies inherent in a 50-state system.

Perhaps most relevant to the issue of claim denials, the NAIC has positioned itself as the “authoritative source for insurance industry information”.⁴

It operates a vast data repository, collecting comprehensive financial and market data from nearly all insurers operating in the U.S. This information is used to produce a wide range of statistical reports and analytical tools that support the regulatory efforts of its members.⁴

However, the NAIC’s mandate is to assist state regulators in serving the public interest, not to serve the public directly by publishing granular, company-specific performance data.³

This distinction is a central reason for the public data gap on claim denials.

The very data that would allow for robust, nationwide, company-by-company comparisons of claim handling is collected by the NAIC but is primarily reserved for regulatory use, not public consumption.

C. The Limited Federal Purview: The Federal Insurance Office (FIO) and Systemic Risk

The federal government’s role in overseeing homeowner insurance remains circumscribed.

The most significant federal entity is the Federal Insurance Office (FIO), established within the U.S. Department of the Treasury by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.⁶

The creation of the FIO did not displace the state-based regulatory system.

Instead, its authority is largely confined to monitoring and advisory functions.

The FIO is empowered to monitor all aspects of the insurance sector to identify potential systemic risks to the financial system.

It also has a specific mandate to monitor the extent to which traditionally underserved communities have access to affordable non-health insurance products.⁶

Furthermore, the FIO represents the United States in international insurance standard-setting bodies.⁶

It does not, however, have the authority to regulate the day-to-day business of insurance, investigate individual consumer complaints, or dictate claim-handling practices.

The relationship between the FIO and the state-based system is one of coordination rather than hierarchy.

For instance, in a 2024 data call designed to gather market intelligence on homeowners insurance, the NAIC agreed to share an anonymized subset of the collected data with the FIO.

This was done explicitly to “avoid undue duplication of efforts and compliance burdens on the U.S. insurance industry,” underscoring the FIO’s reliance on the data infrastructure managed by the NAIC and the state regulators.⁷

The cumulative effect of this multi-layered regulatory structure is a system that, by its very design, creates a fragmented data landscape.

The decentralization of power under the McCarran-Ferguson Act ensures that primary data and enforcement reside at the state level.

The NAIC, while acting as a central data aggregator, operates as a service organization for its state regulator members, not as a public transparency portal.

Finally, federal bodies like the FIO have a monitoring mandate but lack the direct regulatory power and independent data-gathering mechanisms to enforce uniform public disclosure.

This architecture results in a system where the most comprehensive data on industry practices, such as claim denials, is collected but remains largely inaccessible to the public, creating a structural information asymmetry that favors the industry and presents significant challenges to consumers and independent analysts.

II. The Data Dilemma: Quantifying Homeowner Claim Denials

A significant challenge in assessing the state of the homeowner insurance market is the profound lack of official, publicly accessible data on claim denial rates.

While regulators collect vast quantities of information, the specific metrics that would allow consumers to compare the claim-handling performance of different insurers are not systematically published.

This data vacuum has been filled by third-party analyses, leading to a contentious public debate over the true rate of claim rejections and the methodologies used to calculate them.

A. The Official Data Gap and the Market Conduct Annual Statement (MCAS)

State departments of insurance, the primary regulators, regularly publish reports on their respective markets.

However, these publications tend to focus on high-level metrics such as total written premiums, market share, and aggregate losses incurred by insurers, often broken down by peril or geographic area.⁸

For example, the California Department of Insurance provides detailed reports on premiums, exposures, and fire-related losses by ZIP code, but does not publish statistics on claim approval or denial outcomes.⁸

Similarly, the Texas Department of Insurance offers extensive data on insurer loss ratios and financial performance but does not provide public reports on claim denial rates.⁹

This official data gap is particularly vexing because the necessary information is, in fact, being collected.

The NAIC’s Market Conduct Annual Statement (MCAS) is a uniform data collection tool used by nearly all states to gather detailed claims and underwriting information from insurers across multiple lines of business, including homeowners insurance.¹¹

The explicit purpose of the MCAS is to enable regulators to monitor company practices and identify “underwriting and claim payment patterns of individual companies and the industry as a whole”.¹³

This creates a paradox: the MCAS system was designed to provide regulators with the precise data needed for transparency and oversight, yet the company-specific results of this data collection are not made public.

For instance, a 2022 MCAS national survey revealed that Florida insurers had the highest percentage of unpaid claims in the nation, but the report did not disclose the performance of individual companies, leaving consumers in the dark about which insurers were driving this trend.¹⁴

This policy of non-disclosure forces consumers, advocates, and researchers to rely on alternative sources to understand claim-handling performance.

B. Third-Party Intelligence: The Weiss Ratings Analyses and Industry Controversy

Into this data vacuum has stepped Weiss Ratings, an independent financial rating agency.

By obtaining and analyzing the same raw data that insurers submit to the NAIC, Weiss Ratings has published a series of reports that have brought the issue of claim denials to the forefront and sparked significant controversy.¹⁵

The key findings from these analyses point to a substantial and growing rate of claims being closed without payment.

Nationally, Weiss Ratings found that the percentage of homeowner claims closed without payment rose from 24.9% in 2004 to 37.4% in 2023, and further to 42% in 2024.¹⁶

The reports also highlight stark differences at the state and company level:

• State-Level Findings: In Texas, the analysis found that 47% of homeowner claims were closed without payment in 2023, a rate significantly higher than the national average.¹⁵ In Florida, an analysis of 2023 data showed that several major insurers closed nearly half of all claims without payment.¹⁴
• Company-Specific Findings (2023 Data): The reports named several large national insurers with high rates of non-payment. Among companies that closed 50,000 or more claims, the rates of closure without payment included: Farm Bureau Property & Casualty (70.5%), American Bankers Insurance Company (51.2%), Allstate Indemnity Company (50.5%), Farmers Insurance Exchange (49.7%), United Services Automobile Association (USAA) (48.2%), USAA General Indemnity Company (48%), USAA Casualty Insurance Company (48%), Allstate Vehicle & Property Insurance Company (47.1%), and Allstate Insurance (46.4%).¹⁶ A separate analysis focusing on California found similar high rates for affiliates of Farmers (approx. 50%), USAA (48%), and Allstate (46%).¹⁹

The insurance industry has forcefully contested these findings.

Insurers such as Allstate have dismissed the Weiss analysis as “inaccurate” and “misleading”.¹⁵

The core of the industry’s rebuttal is that the metric “closed without payment” is not equivalent to an improper “denial.” They argue that there are numerous legitimate reasons for a claim to be closed without payment, including:

1. The estimated cost of repairs falls below the policyholder’s deductible.
2. The claim is for a peril explicitly excluded from the policy (e.g., flood damage on a standard homeowners policy).
3. The policyholder withdraws the claim.
4. The claim is found to be a duplicate or fraudulent.¹⁴

This dispute highlights a fundamental battle over definitions and transparency.

While the industry’s points are technically valid, their refusal to voluntarily publish their own audited, standardized denial statistics creates a situation where they can critique third-party analyses without offering a transparent alternative.

The politically charged nature of this issue was underscored when Florida’s insurance regulator issued subpoenas to Martin Weiss and his firm following the publication of critical data on the state-run Citizens Property Insurance Corporation.²¹

The steady, two-decade rise in the “closed without payment” rate cannot be dismissed solely as an increase in invalid claims.

It is a powerful indicator of systemic stress within the insurance market.

As insurers grapple with the dual pressures of rising construction cost inflation and the increasing frequency and severity of climate-related catastrophes, they have employed strategies to manage their financial exposure.¹⁰

One of the primary tools is the significant increase in policy deductibles.¹⁵

When a homeowner with a higher deductible files a claim for a valid, covered loss that is nevertheless below this new, higher threshold, the claim is correctly “closed without payment”.¹⁵

Therefore, the rising rate of non-payment is a direct, measurable consequence of a strategic industry shift to transfer a greater portion of the financial risk of a loss back to the consumer.

In this context, the “closed without payment” metric, while imperfect, serves as a crucial proxy for the declining practical value and affordability of insurance coverage itself.

III. Anatomy of a Denial: A Taxonomy of Common Rejection Rationales

A homeowner insurance claim can be denied for a multitude of reasons, ranging from clear-cut policy exclusions to procedural errors made by the policyholder during the filing process.

Understanding this taxonomy is essential for homeowners seeking to protect their assets and for analysts assessing the health of the insurance market.

Based on available industry data, these reasons can be categorized and quantified, revealing that while coverage limitations are the single largest factor, a significant portion of denials stem from failures in the claims process itself.

A. Policy Exclusions (Approx. 33% of Denials)

The most common reason for a claim to be denied is that the cause of the loss is explicitly excluded from the insurance contract.²⁵

Homeowner policies, whether they are “named peril” (covering only listed causes of loss) or “all-risk” (covering all causes except those listed as exclusions), contain carefully worded limitations that policyholders often overlook until a loss occurs.²⁶

Key examples of standard exclusions include:

• Flood Damage: Standard homeowners policies universally exclude damage from flooding, which includes storm surge, overflowing rivers, and heavy surface water accumulation. Separate coverage must be purchased through the National Flood Insurance Program (NFIP) or a private flood insurer.²⁷
• Earth Movement: This category typically includes damage from earthquakes, landslides, mudflows, and sinkholes. Like flood coverage, earthquake insurance must be purchased separately or as an endorsement to the main policy.²⁷
• Gradual Damage: Policies are designed to cover sudden and accidental losses. They generally exclude damage that occurs over time, such as gradual water seepage leading to mold, rot, or foundation issues caused by settling.²⁷ A common point of dispute is differentiating between a sudden event (like a pipe bursting) and a gradual one (a slow leak).
• Lack of Maintenance (Negligence): Insurers can deny claims if the damage was caused or exacerbated by the homeowner’s failure to perform regular maintenance. For example, a roof leak caused by old, worn-out shingles may be denied on the grounds of wear and tear and negligence.²⁹
• Pest Infestation: Damage caused by termites, rodents, or other vermin is typically considered a maintenance issue and is excluded from coverage.²⁷

B. Procedural Failures by the Policyholder

A substantial number of denials are not related to the nature of the damage itself but to the policyholder’s actions—or inaction—after the loss occurs.

The burden of proof in an insurance claim rests squarely on the insured, and failure to meet procedural requirements can be grounds for denial.

• Late Reporting (Approx. 15% of Denials): Insurance policies contain a provision requiring the policyholder to provide “prompt notice” of a loss.²⁶ While the definition of “prompt” can be flexible, an unreasonable delay can jeopardize the insurer’s ability to conduct a timely and accurate investigation. If the delay prejudices the insurer, the claim may be denied.²⁵
• Insufficient Documentation (Approx. 12% of Denials): The policyholder must be able to prove their loss. This requires providing sufficient evidence of the damage and the value of the property lost. A lack of documentation—such as clear photographs or videos of the damage, receipts for damaged items, or a comprehensive home inventory—can lead to a denial, particularly for claims involving theft or personal property.²⁵
• Failure to Mitigate Damage (Approx. 8% of Denials): After a loss occurs, the policyholder has a contractual duty to take reasonable steps to protect the property from further damage. This could involve placing a tarp over a damaged roof to prevent rain from entering or shutting off the water supply after a pipe bursts. If the homeowner fails to mitigate, the insurer can deny the portion of the claim related to the subsequent, preventable damage.²⁶

C. Administrative and Technical Grounds

A final category of denials relates to the status of the policy and the accuracy of the information provided to the insurer, both at the time of application and during the claim.

• Misrepresentation on Application (Approx. 9% of Denials): If an insurer discovers during a claim investigation that the policyholder provided false or misleading information on their initial application, it may deny the claim and, in some cases, seek to rescind the policy entirely. This could involve failing to disclose prior claims, misstating the age of the roof, or not revealing that a business is being operated from the home.²⁵
• Non-Payment of Premiums: If a policy has lapsed due to non-payment of premiums, there is no coverage in force. This is a straightforward contractual reason for denial.²⁶
• Damage Below Deductible: An insurance policy is only triggered once the amount of covered loss exceeds the policy’s deductible. If an adjuster assesses the damage to be less than the deductible amount, the claim will be closed without payment because the financial threshold for coverage has not been met.¹⁵
• Lack of Insurable Interest: This is a less common but critical technicality. A person can only insure property in which they have a financial interest, known as an “insurable interest.” A significant issue has emerged for homeowners who place their property into a revocable trust for estate planning. If they fail to update their insurance policy to name the trust as an “additional insured,” the insurer may argue that the individual policyholder no longer has a direct insurable interest—the trust does. This can be used as grounds to deny an otherwise valid claim, rendering a fully paid policy ineffective at the moment of a catastrophic loss.³⁴

While policy exclusions represent a clear contractual matter, the high percentage of denials attributed to procedural missteps points to a significant “procedural burden shift.” The complexity of the claims process itself, with its strict timelines and documentation requirements, becomes a formidable barrier to recovery.

This burden is not borne equally.

Policyholders who are elderly, have low financial literacy, or are experiencing the profound trauma and dislocation of a major disaster are disproportionately likely to make a procedural error.

As a result, the claims process can function as an administrative filter, leading to the denial of legitimate, covered claims not on their merits, but on the claimant’s ability to navigate a complex and demanding system during a time of extreme stress.

The “home in a trust” issue is a particularly stark example of how a non-obvious administrative requirement can completely invalidate coverage for unsuspecting homeowners.

The following table summarizes the primary reasons for claim denials, their relative frequency, and proactive steps policyholders can take to mitigate these risks.

Reason for Denial	Percentage of Total Denials	Description and Proactive Policyholder Action
Policy Exclusions	~33%	The damage was caused by a peril explicitly excluded in the policy contract, such as flood, earthquake, or gradual wear and tear.25	Action: Carefully review the “Exclusions” section of your policy. Purchase separate policies or endorsements for major risks like floods and earthquakes if you live in a vulnerable area.
Late Reporting	~15%	The policyholder failed to notify the insurer of the loss in a timely manner, which hindered the company’s ability to investigate the claim.25	Action: Report any potential claim to your insurer as soon as it is safe to do so after a loss. Do not delay, even if you are unsure of the full extent of the damage.
Insufficient Documentation	~12%	The policyholder did not provide adequate proof of the loss or the value of the damaged property. This is a common issue for theft and personal property claims.25	Action: Create and maintain a detailed home inventory, including photos, videos, and receipts for major purchases. After a loss, thoroughly document all damage with photos and videos before any cleanup or repairs begin.
Misrepresentation on Application	~9%	The insurer discovered that the policyholder provided false or incomplete information when applying for the policy, such as undisclosed prior claims or incorrect property details.25	Action: Be completely truthful and accurate on your insurance application. Inform your insurer of any significant changes to your property or its use.
Failure to Mitigate Damage	~8%	The policyholder did not take reasonable steps to prevent further damage after the initial incident, such as covering a hole in the roof to stop rain from entering.25	Action: After a loss, take immediate and reasonable steps to secure your property from additional harm. Keep receipts for any temporary repairs (e.g., tarps, plywood) as these costs are often reimbursable.

IV. A Comparative Analysis: Insurer and State-Level Performance

The experience of a homeowner filing a claim is not uniform across the country.

It is shaped significantly by two key variables: the practices of their specific insurance carrier and the regulatory and environmental climate of the state in which they reside.

Analysis of available data reveals distinct patterns, with certain companies and states exhibiting significantly higher rates of claim denials and market distress.

A. Benchmarking Insurer Performance: A Contested Landscape

Because official, regulator-published data on company-specific denial rates is unavailable, benchmarking insurer performance relies on third-party analyses and qualitative reports from consumer advocates and legal professionals.

While these sources are disputed by the industry, they provide the only publicly available lens through which to compare carriers.³⁵

Investigations by Weiss Ratings, often in conjunction with media outlets like the Los Angeles Times, have consistently identified several of the nation’s largest insurers as having high rates of claims closed without payment.

In a 2023 analysis of the California market, affiliates of Farmers Insurance (approx.

50%), USAA (48%), and Allstate (46%) were reported to have non-payment rates well above the national average.¹⁹

A broader national analysis for the same year identified similar high rates for these companies and their various subsidiaries, along with Farm Bureau Property & Casualty, which had the highest rate at 70.5%.¹⁶

These statistical findings are often corroborated by qualitative assessments from law firms and consumer groups that track litigation and complaints.

These sources frequently list companies like Allstate, State Farm, AIG, Farmers, and USAA among the “worst” insurers, citing patterns of delaying claims, offering lowball settlements, and allegations of bad faith tactics.³⁶

It is critical to reiterate that the insurers themselves dispute these characterizations and the underlying data, but they do not provide their own transparent statistics to counter them.²⁰

B. Geographic Hotspots: Climate Risk and Regulatory Climate

Claim denial rates and overall market health vary dramatically by state, with a clear correlation between elevated risk of natural disasters and market dysfunction.

States prone to catastrophes like hurricanes, wildfires, and severe convective storms have become hotspots for claim disputes and insurer financial losses.

• Florida: As a state with extreme exposure to hurricanes, Florida’s insurance market is under immense pressure. It leads the nation with claim denial rates that can be nearly double the national average, ranging from 9-11%.²⁵ Analyses show that some major insurers in the state, including subsidiaries of State Farm and Allstate, closed nearly 50% of claims without payment in 2023.¹⁴ The 2022 NAIC MCAS survey confirmed that Florida insurers had the highest percentage of unpaid claims in the U.S., reflecting a market struggling with high litigation rates and massive, recurring storm losses.¹⁴
• Texas: The Texas market is heavily impacted by the frequency and severity of weather events, particularly hail storms.¹⁰ The state exhibits elevated denial rates of 7-8%, driven by complex disputes over the cause and extent of damage from hail and wind.²⁵ Insurers in Texas have operated at an underwriting loss for extended periods, paying out more in claims and expenses than they collect in premiums. For example, from 2018-2022, insurers paid out an average of $1.02 for every $1 collected, a figure that spiked to $1.41 after Winter Storm Uri in 2021.¹⁰ These financial pressures, combined with inflation in labor and material costs, contribute to a difficult claims environment for consumers.¹⁰
• California: The primary driver of market turmoil in California is the escalating threat of catastrophic wildfires.³⁷ The state has seen some of the highest total insurance losses in the country.³⁷ This has led not only to high denial rates from some of the state’s largest insurers but also to a severe availability crisis, with many carriers ceasing to write new policies in high-risk areas or exiting the state’s homeowners market altogether.¹⁹ This forces many homeowners into the California FAIR Plan, the state’s insurer of last resort, which has itself faced scrutiny and legal action over its handling of smoke damage claims.³⁸

These high-risk states are trapped in a destructive feedback loop.

First, an increase in the frequency and severity of catastrophic events leads to massive claim payouts and significant underwriting losses for insurers.¹⁰

Second, to restore profitability and manage future risk, insurers respond by sharply increasing premiums, raising deductibles, tightening underwriting standards, non-renewing policies in high-risk zones, and applying stricter scrutiny to claims, which can lead to more denials.¹⁴

Third, these actions make insurance less affordable and less accessible, forcing some homeowners to accept higher deductibles (making them functionally underinsured for smaller losses) or, in extreme cases, to go without coverage entirely.³⁹

Finally, this market contraction creates immense political pressure on regulators to suppress rate increases or expand state-run insurance pools, which can further distort market signals and concentrate risk within the state.

This cycle ultimately undermines the core function of insurance—to distribute risk—and leaves homeowners and taxpayers increasingly exposed to the financial consequences of disaster.

C. The Role of Consumer Advocacy and Research

In the absence of robust regulatory transparency, non-profit consumer advocacy organizations play a critical role in research, education, and direct assistance to policyholders.

• United Policyholders (UP): This organization is a key resource for consumers navigating the claims process. It offers expert forums, sample letters, and guidance for fighting claim denials.⁴¹ UP’s research has been instrumental in highlighting systemic problems, particularly the issue of underinsurance. Their post-disaster surveys consistently find that a majority of homeowners—in some cases nearly 75%—discover they have inadequate policy limits to fully rebuild, a problem often caused by insurers using outdated or inaccurate replacement cost estimators.³⁹
• Consumer Federation of America (CFA): The CFA focuses on the broader issues of insurance affordability, availability, and fairness. Their research has documented the disproportionate impact of market dysfunction on communities of color and low-income households, finding that millions of homeowners in these demographics are more likely to lack insurance coverage altogether.⁴⁰ The CFA is a leading voice in advocating for improved data collection by regulators, arguing that transparency on denial rates and coverage gaps is essential for addressing long-standing issues of racial and economic equity in the insurance market.⁴⁰

V. Pathways to Resolution: A Strategic Guide to Contesting a Denied Claim

When a homeowner receives a denial letter from their insurer, it is not necessarily the end of the process.

A structured, multi-stage system exists for policyholders to challenge an insurer’s decision.

This process, however, requires persistence, meticulous documentation, and an understanding of the escalating steps involved, from internal company reviews to formal legal action.

A. Step 1: The Internal Appeal with the Insurer

The first and most crucial step after receiving a denial is to initiate a formal appeal directly with the insurance company.²⁹

Many denials are not final determinations but are based on incomplete information or a misunderstanding that can be rectified at this stage.

The process for an effective internal appeal involves several key actions.

First, the policyholder must carefully review the written denial letter to understand the specific reason for the rejection.

The insurer is required to provide this explanation.³²

Second, the policyholder should gather all relevant documentation, including a copy of their insurance policy, the denial letter, all photographs and videos of the damage, receipts for temporary repairs, and independent estimates from contractors.²⁹

Third, a formal appeal letter should be drafted.

This letter should clearly state that the policyholder is appealing the decision, address the specific reason for denial with countervailing evidence, and include copies of all supporting documentation.

All communication with the insurer—including phone calls, emails, and letters—should be meticulously documented, noting dates, times, and the names of company representatives spoken to.³²

B. Step 2: Filing a Complaint with State Regulators

If the internal appeal process fails to produce a satisfactory result, the policyholder’s next recourse is to file a formal complaint with their state’s Department of Insurance (DOI).²⁹

State DOIs are empowered to investigate consumer complaints to determine if an insurer has violated state insurance laws or the terms of the policy contract.²

While the specific procedures vary by state, the process generally involves submitting a complaint form online or by mail, along with all supporting documentation.

• In Texas, the Department of Insurance (TDI) provides a consumer help line for questions and an online portal for filing formal complaints for various types of insurance, including homeowners.⁴⁶
• Georgia’s Office of the Commissioner of Insurance (OCI) also recommends using its online consumer complaint portal and provides a detailed list of necessary information, such as policy numbers, claim numbers, and a concise description of the problem.⁴⁴
• The California Department of Insurance (CDI) offers a similar online portal for non-health insurance complaints.⁴⁷
• In Massachusetts, the Division of Insurance allows consumers to download a complaint form that can be submitted via email, mail, or fax.⁴⁸

Upon receiving a complaint, the DOI will typically forward it to the insurance company for a formal response and review the case to ensure compliance with state law.⁴⁴

The DOI can act as a mediator and, if a violation is found, can require the company to take corrective action.

However, it is important to note that the DOI is a regulatory body, not a court of law.

It generally cannot force an insurer to pay a disputed claim unless there is a clear and unambiguous violation of law or policy language.⁴⁴

C. Step 3: Engaging Professional Assistance

When the internal appeal and state complaint processes are exhausted, policyholders may need to seek professional assistance to continue their dispute.

• Public Adjusters: These are professionals licensed by the state who work exclusively for the policyholder, not the insurance company. A public adjuster will conduct an independent assessment of the damage, review the policy, and negotiate directly with the insurer on the homeowner’s behalf.²⁹ They are particularly useful when the dispute is not about whether the loss is covered, but about the
  scope and value of the damage—that is, when the policyholder believes the insurer’s settlement offer is too low. Public adjusters typically work on a contingency fee basis, taking a percentage of the final claim settlement.²⁹
• Attorneys: If the dispute involves a complex legal interpretation of the policy contract, or if there is evidence that the insurer acted in “bad faith,” hiring an attorney is the appropriate next step. Bad faith can include denying a claim without conducting a reasonable investigation, misrepresenting policy terms, or making an unreasonably low settlement offer.³⁰ An attorney can file a lawsuit against the insurer to recover the policy benefits. If bad faith is proven, a court may also award damages beyond the policy limits to compensate the homeowner for financial losses and distress caused by the insurer’s wrongful conduct.⁴³

The claim dispute process can be understood as an “exhaustion funnel,” designed with escalating stages that demand increasing levels of time, resources, and expertise from the policyholder.

The initial stages—the internal appeal and the state complaint—are low-cost but require significant personal effort and organizational skill.

The subsequent stages involve a direct financial investment, as both public adjusters and attorneys are paid from the policyholder’s potential recovery.

This multi-tiered structure, while providing avenues for recourse, can also function as a deterrent.

Insurers, as institutions with vast resources, are positioned to withstand a protracted dispute.

In contrast, a policyholder may weigh the certain cost and effort of escalating their challenge against an uncertain potential for recovery.

For claims of moderate value, this cost-benefit analysis may lead a homeowner to abandon a valid but disputed claim, not because it lacks merit, but because the process of pursuing it has become too arduous or expensive.

This creates a systemic power imbalance where the structure of the resolution process itself can filter out valid claims based on the claimant’s resources and tenacity.

VI. Unlocking the Records: Accessing Data via Public Information Requests

For researchers, journalists, and consumer advocates seeking to move beyond anecdotal evidence and third-party analyses, obtaining raw data directly from regulatory bodies is a potential, albeit challenging, avenue.

This is pursued through federal and state public information laws, which grant citizens the right to access government records.

A. The Federal Freedom of Information Act (FOIA)

The Freedom of Information Act (FOIA) is a federal law that provides the public with the right to request access to records from any federal agency.⁵⁰

A FOIA request must be submitted in writing and must “reasonably describe” the records being sought.⁵¹

Most federal agencies now accept requests electronically.⁵¹

However, for homeowner insurance claim data, FOIA’s utility is limited.

Because insurance is regulated almost entirely at the state level, federal agencies do not possess comprehensive, company-specific claim files or denial statistics.¹

A FOIA request could, however, be directed at federal entities that have some intersection with the insurance industry.

For example, one could file a request with the Treasury Department’s Federal Insurance Office (FIO) for reports, analyses, or communications related to its monitoring of the homeowners insurance market.⁶

Similarly, a request could be sent to the Federal Emergency Management Agency (FEMA) for aggregate data related to claims under the National Flood Insurance Program.⁵³

It is important to recognize that FOIA contains nine exemptions that allow agencies to withhold information.

These exemptions protect interests such as national security, personal privacy, and, critically for insurance data, “trade secrets and confidential business information”.⁵⁰

An agency could invoke this exemption to deny a request for sensitive industry data it has collected.

B. State Public Records Acts

The more direct and promising route for obtaining granular insurance data is through state-level public records laws, often called Open Records Acts.⁵⁴

Every state has such a law, and it applies to all state government agencies, including the Department of Insurance (DOI).

The process for filing a request is similar to the federal process, but it is directed to the specific state agency.

• The California Department of Insurance, for instance, requires that written requests be sent to a designated Custodian of Records. The request should be as specific as possible to enable staff to locate the records. The agency charges fees to cover the direct cost of duplication.⁵⁶
• Georgia’s Office of the Commissioner of Insurance mandates that all Open Records requests be submitted via an online form.⁵⁴
• Utah’s Insurance Department provides free public access to many rate and form filings through the NAIC’s online SERFF interface, but it charges fees for written requests that require staff time to compile other records.⁵⁷

While state laws provide a legal right to access public records, the same challenges with exemptions apply.

State DOIs collect a vast amount of detailed information from insurers as a condition of their license to operate in the state.

This includes the highly valuable Market Conduct Annual Statement (MCAS) data, which contains detailed claims information.¹²

However, insurers can argue that this granular, company-specific data constitutes a trade secret or confidential commercial information.

The DOI, acting as both regulator and custodian of the data, may agree and invoke a statutory exemption to deny a public records request for this information.⁵⁶

This creates a public records paradox.

The very laws designed to promote government transparency and accountability can be used by state agencies to shield the performance data of the private industries they are charged with regulating.

The DOI, in its role as a collector of sensitive industry data, can be transformed from a public watchdog into a gatekeeper of that information.

This reinforces the information asymmetry that pervades the homeowner insurance market, making it exceedingly difficult for the public to access the underlying data needed to independently verify claim denial rates and compare insurer performance.

VII. Strategic Outlook and Recommendations

The challenges confronting the U.S. homeowner insurance market—rising costs, increasing claim denials, and a pervasive lack of transparency—require a multi-faceted response from all stakeholders.

To restore stability and rebuild consumer trust, concerted action is needed from policyholders, regulators, and the insurance industry itself.

A. For Policyholders and Advocates

Individual homeowners and the organizations that represent them can take both proactive and reactive steps to navigate the current environment.

• Proactive Measures: The most effective strategy is to mitigate risks before a loss occurs. Homeowners should conduct an annual, in-depth review of their insurance policy with their agent to ensure they understand their coverage limits, deductibles, and key exclusions. Creating and regularly updating a detailed home inventory, complete with photographs, videos, and receipts for major items, is an essential step that can dramatically expedite the claims process and prevent denials based on insufficient documentation.³¹ Furthermore, homeowners who have placed their property in a trust must immediately contact their insurer to ensure the trust is properly named on the policy to avoid a catastrophic denial based on a lack of “insurable interest”.³⁴
• Advocacy Goals: Consumer advocacy groups should focus their efforts on legislative and regulatory reform aimed at mandating transparency. The primary goal should be to lobby state legislatures and insurance commissioners to require the public disclosure of standardized claims data. This should include, at a minimum, company-specific rates for claim denials, claims closed without payment, the average time to resolve a claim, and consumer complaint ratios. This data would empower consumers to make informed choices and enable true market-based accountability.

B. For Regulators and Policymakers

State regulators are uniquely positioned to address the information asymmetry at the heart of the market’s current dysfunction.

• Mandate Transparency: State insurance commissioners, working through the NAIC, should develop a mandatory, public-facing “Homeowner Insurance Scorecard.” This tool would provide consumers with clear, easily comparable metrics on each licensed insurer’s performance in their state. By making this information accessible, regulators can foster a more competitive market where companies are rewarded for superior service and fair claim handling.
• Standardize Definitions: To make any public data meaningful, the NAIC must establish and enforce standardized definitions for key terms. A clear, uniform distinction between a “denied claim” and a claim “closed without payment” (and the sub-categories within the latter) is essential to eliminate ambiguity and prevent misleading comparisons. This would force an apples-to-apples accounting of claim outcomes across the entire industry.
• Simplify Consumer Recourse: States should review and streamline their consumer complaint processes to make them more accessible and less intimidating for the average homeowner. Additionally, regulators should actively promote and expand the availability of low-cost mediation programs to resolve claim disputes. These programs can provide a more efficient and less adversarial path to resolution than litigation, benefiting both consumers and insurers.³²

C. For the Insurance Industry

The insurance industry has a vested long-term interest in restoring consumer trust and ensuring the sustainability of the market.

• Embrace Transparency: While the industry has resisted the release of granular claims data, a proactive approach to transparency could be a powerful competitive tool. Companies with strong records of fair and timely claim payments should voluntarily publish this data to differentiate themselves from competitors and rebuild trust with the public. Resisting all transparency efforts only fuels public suspicion that the industry has something to hide.
• Invest in Consumer Education: A significant portion of claim denials result from consumer error, such as inadequate documentation or misunderstanding of policy terms.²⁵ Insurers should significantly increase their investment in consumer education, not just with marketing materials, but with clear, practical guidance provided at the point of sale and at every renewal. This should include explicit warnings about common pitfalls, such as the critical need to update policies after creating a family trust.³⁴ By helping policyholders avoid common mistakes, insurers can reduce the number of procedural denials, improve customer satisfaction, and lower their own administrative costs associated with managing disputes.

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