Have you had a valid health insurance claim denied? What can be done to restore the protection that insurance is meant to provide?
In the book Delay, Deny, Defend, Jay Feinman argues that major US insurance companies have transformed from trusted protectors to profit-seeking entities that systematically avoid paying legitimate claims. He says major insurers abandoned their traditional protective role to maximize profits at the expense of their policyholders.
Continue reading below for an overview of this eye-opening book.
Delay, Deny, Defend Overview
In the book Delay, Deny, Defend, published in 2010, legal scholar and insurance expert Jay Feinman argues that major US insurance companies have transformed from trusted protectors to profit-maximizing entities that systematically avoid paying legitimate claims.
When you purchase insurance—whether for your home, car, or health—you’re buying more than just a policy. You’re investing in peace of mind: a promise that you’ll be protected if and when disaster strikes. Yet, notes Feinman, many Americans find themselves bewildered and frustrated when filing claims, discovering that the protection they thought they’d purchased seems to evaporate when they need it most.
This disconnect between expectation and reality is no accident. Feinman alleges that what was once a system designed primarily to protect policyholders has evolved into one that prioritizes corporate profits over customer care. He argues that this shift represents a profound breach of the traditional insurance promise. This guide explores Feinman’s explanation for how this shift occurred and its consequences for American policyholders, looking at:
- How major insurance companies shifted from protecting policyholders to maximizing profits for shareholders beginning in the 1990s
- How this approach works in practice through deliberately slowing the claims process, routinely rejecting valid claims, and aggressively fighting policyholders in court when they persist
- Feinman’s proposed reforms to restore the proper function of insurance
Throughout this guide, we’ll supplement Feinman’s ideas with insights from other commentators on the topic.
Part 1: The Transformation of the Insurance Industry
We’ll begin this guide by exploring the origins of the “delay, deny, defend” strategy that Feinman says is practiced so widely by major insurers today. First, we”ll examine the evolution and purpose of insurance throughout history. Then, we’ll investigate how, beginning in the 1990s, major insurance companies underwent a significant shift in their business model—one that Feinman says prioritizes profit over people.
The Evolution and Purpose of Insurance
According to Feinman, insurance serves as a key safety net for middle-class Americans by offering financial security for when life gets unpredictable. When we buy insurance, we’re buying a promise of protection against financial losses. Based on this simple promise, insurance has grown into a massive industry in the US, with thousands of companies now collecting hundreds of billions in premiums each year.
The business model of the insurance industry is straightforward, explains Feinman: People pay a small, certain amount now (the premium) to avoid potentially losing much more later. An insurance company can afford to absorb major losses that individuals can’t because it spreads its risk across a large pool of policyholders (called the “risk pool,” often numbering in the millions), most of whom don’t experience a loss or hardship. In other words, insurance transfers risk from one person (the individual policyholder) to a much larger group (the entire pool of policyholders).
For example, let’s say a family pays their homeowner’s insurance premium of $1,200 annually, and they have a $1,000 deductible (the amount of money they must pay out-of-pocket before their insurance coverage pays for a claim). One evening, a severe electrical storm causes a power surge that sparks a fire in their basement, causing $78,000 in damage. Their insurance policy covers the full cost of repairs minus their $1,000 deductible. In this case, the family transferred their risk by paying a small, certain amount ($1,200 annually) to protect against a potentially catastrophic financial loss ($78,000).
From Relief to Revenue: The McKinsey Shift
Feinman writes that in the beginning, insurance was supposed to act as a financial safety net. Traditionally, claims departments existed to fulfill the promise of protection that customers purchased. Their primary function was to evaluate losses, process paperwork, and deliver fair payments. But in the 1990s, a major shift in insurance industry behavior began. Big insurers realized that they could boost profits by cutting claim payments to policyholders.
Insurers like Allstate hired McKinsey & Company, a globally influential management consulting firm, to help them find a way to pay less on claims, according to Feinman. McKinsey explained that the key to profits was to systematically reduce payouts to claimants. McKinsey’s financial modeling showed how even small reductions in payouts across thousands of claims—even entirely legitimate claims—would translate to millions in additional profits.
This went against the way that claims departments had typically operated. Traditionally, claims departments’ primary function was to evaluate losses, process paperwork, and deliver fair payments. But McKinsey encouraged insurers to reconceptualize these departments as revenue generators, instituting a number of policies designed to systematically reduce payments.
Below, we’ll look at some of the policies insurers began to implement in their efforts to reduce payouts to policyholders.
Policy #1: Shifts in Claim Handler Incentives
The first new policy was to evaluate claims handlers by how little they paid out, not by customer satisfaction or whether they reached fair settlements. Accordingly, insurance adjusters—employees who investigate claims and determine how much the company will pay—started receiving bonuses based on keeping payments low rather than serving policyholders properly. On top of that, insurance companies began requiring supervisor approval for settlements above certain thresholds.
Policy #2: Sorting Claimants
The second policy change McKinsey recommended was to categorize claimants into segments. Those who the insurance companies predicted would be willing to accept quick settlements would receive below-fair-value offers for their claims immediately. Those who were predicted to be more likely to fight would be subjected to systematic delays and denials—putting the pressure on those claimants to settle for less. For those who persisted, McKinsey advised aggressive litigation tactics designed to make pursuing claims financially exhausting. We’ll flesh out these tactics in the next section.
Part 2: The “Delay, Deny, Defend” Strategy
Once insurers have sorted their claimants and paid those willing to accept below-fair offers, they turn to those who hold out—subjecting them to what Feinman calls the “delay, deny, defend” strategy. This strategy includes systematically slowing down claim payments; refusing to negotiate and selectively interpreting policy language to deny legitimate claims; and aggressively fighting against claimants in court. We’ll walk through each prong of the strategy in detail, then discuss the broader societal costs it imposes.
Delay: Slowing Down the Payment Process
Feinman explains that under the “delay” part of their three-pronged approach to profit maximization, insurance companies deliberately slow down claim payments through various stonewalling tactics. These can include requiring excessive documentation, transferring claims between multiple adjusters, failing to return phone calls promptly, and using complex technical language in communications. This systematic delay serves two financial purposes, which we’ll explore below.
Financial Benefit of Delay #1: Investment Income
The first benefit of delay is that insurers earn income on their premiums. Every day an insurer delays payment, they continue earning investment income on funds that would otherwise be paid to claimants. It’s essentially free capital that insurance companies can invest while payout decisions remain pending.
Financial Benefit of Delay #2: Wearing Claimants Down
Second, delay creates mounting financial pressure on claimants. Most people filing insurance claims face immediate expenses—whether it’s medical bills, repair costs, or lost income. As Feinman points out, insurers understand that prolonging the process gradually wears down claimants’ financial and emotional resources. When customers become desperate, they’re far more likely to accept any payment, even settlements far below what their policy actually entitles them to.
For example, let’s imagine someone who has a homeowner’s insurance policy on their house in Oklahoma. After a tornado tears through their house, they file a claim for their damaged home. However, suppose the insurer employs delay tactics against this policyholder. First, they might take two weeks to send an adjuster. When the adjuster finally arrives, she may demand extensive documentation on the history of the house to prove that the damage was actually tornado-related, itemized lists of everything stored in the house, and three separate contractor estimates for repairs. While all of this is happening, the company continues to earn investment returns on the family’s premium payments.
Deny: Stonewalling Policyholders
Feinman writes that after the initial delays to claims processing, many policyholders—worn down by the stall tactics—will accept a lowball offer from their insurers. But some people persist in pursuing their claims—and the insurance companies respond with a more aggressive strategy: denial. This usually happens once the insurance company has either reached the maximum legal limit on how long they can delay a claim or they calculate that shifting to a denial strategy is the more profitable option.
Denial tactics typically take two forms: obstruction and policy interpretation manipulation. We’ll look at each in turn.
Denial Tactic #1: Obstruction
Feinman explains that obstruction blends delay with outright denial: Insurance companies simply refuse to engage in meaningful negotiation after making their initial low offer. This is because insurers understand that most claimants face mounting medical bills, repair costs, and lost wages. As financial pressure builds, policyholders often lack the resources—both financial and emotional—to sustain a long dispute, forcing them to accept whatever is offered or abandon their claim entirely.
Denial Tactic #2: Policy Interpretation Manipulation
Feinman details how insurance companies train adjusters to find creative interpretations of policy language that often contradict the plain language and obvious meaning of the policy. Further, policies are written with deliberately complex language that can be twisted in ways customers can’t anticipate. Common techniques include claiming that certain damages aren’t covered under the language in the contract or selectively interpreting clauses in the policy to maximize exclusions (things the insurer isn’t responsible for covering) while minimizing coverage.
For example, after a car accident, a patient requires emergency treatment for a broken arm and internal bleeding. Her health insurance policy explicitly covers “emergency medical care” and lists trauma treatment as a covered benefit. The reviewer argues that while the broken arm treatment is covered, the internal bleeding constitutes a “separate medical condition” that may have existed before the accident and therefore is considered a “pre-existing condition.”
In this example, the claim reviewer doesn’t mention that the “pre-existing condition” label only excludes coverage for chronic illnesses or prior diagnoses, not acute trauma or injury (such as internal bleeding, which is an emergency regardless of whether or not it was caused by the car accident). This effectively splits the injuries sustained in a single accident into separate conditions to minimize the company’s responsibility.
Aggressive Defense Strategies
If policyholders push past delays and denials, insurance companies hit them with an aggressive legal defense as their final tactic. This strategy deliberately forces people into costly, drawn-out court battles that most consumers cannot afford to pursue.
According to Feinman, this aggressive approach systematically exploits the economic realities of how personal injury litigation works. Most personal injury attorneys operate on contingency fee arrangements, which means they only get paid if they win—typically taking 30-40% of any final settlement. This puts attorneys in a bind: They have to assess whether a potential case will generate a large enough settlement to justify their investment of time and costly resources like obtaining medical records and hiring expert witnesses.
Feinman writes that insurance companies know that lawyers typically work on contingency fees, so they deliberately exploit this by assigning disproportionate legal resources even to minor claims. Their strategy is to ensure they’ll win by overwhelming claimants with legal firepower. In the short run, this approach is expensive for insurance companies—they might spend more defending against a claim than the claim itself is worth. For example, an insurer might pay $50,000 in legal fees to avoid paying a $25,000 claim.
However, this seemingly irrational spending serves a long-term purpose: It makes personal injury litigation economically infeasible for attorneys. Since lawyers working on contingency only get paid if they win, and insurance companies’ aggressive tactics make winning unlikely, attorneys become reluctant to take on these cases at all. Also, those attorneys who do still accept personal injury cases have a powerful incentive to pressure their clients into accepting lower settlements—ensuring the client gets at least some compensation (and the attorney receives their percentage) rather than risking a complete loss in court.
The Erosion of Trust: A Broader Societal Cost
Feinman writes that the “delay, deny, defend” strategy also deteriorates the social fabric that binds individuals, businesses, and governments. When insurers wrongfully reject claims, they break the fundamental insurance principle of spreading risk across many to protect the few who suffer losses. While insurers continue collecting premiums from the many, they increasingly fail to fulfill their end of the bargain. By prioritizing profits over payouts, insurers shrink the pool of the “protected few” far below what policyholders reasonably expected when they entered the social contract.
This betrayal of the insurance contract forces affected individuals to seek help elsewhere. When legitimate claims are denied, people must turn to government programs, taxpayer-funded safety nets, charitable organizations, and personal networks—essentially shifting the burden from the private insurance system back to society at large, which fosters resentment and backlash against the insurance industry. The result is a weakened social fabric where the risk-sharing mechanism that insurance was designed to provide fails those who need it most.
Part 3: Reform Proposals
Feinman proposes some regulatory reforms to compel better behavior from the insurance companies. These reforms include mandatory data reporting, meaningful financial penalties for violations, and expanded legal rights for policyholders to sue their insurers.
Reform Proposal #1: Mandatory Data Reporting
Feinman stresses the need for mandatory public reporting of claims-handling data. By requiring insurers to disclose how often they pay, delay, or deny claims, consumers would gain the power to choose companies based on their true claims-paying history—rather than catchy slogans or mascots.
Reform Proposal #2: Meaningful Financial Penalties
Feinman proposes meaningful financial penalties for insurance company misconduct that are proportionate to company size. He writes that the current system of fixed fines—often amounting to mere thousands of dollars—creates virtually no deterrent for multibillion-dollar insurance corporations. Feinman suggests that penalties should scale with company assets to create genuine financial incentives for fair claims practices.
For example, imagine a company has $50 billion in assets and is found to have wrongfully denied 100 legitimate homeowner claims after a hurricane. Under current regulations, they might face a fixed penalty of $10,000 for this violation—essentially a rounding error on their balance sheet representing just 0.00002% of their assets. But Feinman’s proportionate penalty approach would dramatically change this calculation. If penalties were set at 0.5% of company assets per serious violation, it would face a $250 million fine. This meaningful financial consequence would transform how executive leadership approaches claims-handling policies.
Reform Proposal #3: Legal Changes
Feinman proposes that consumers should have enhanced legal rights to sue for bad faith. His reasoning centers on the fundamental nature of insurance contracts themselves. Feinman suggests that courts should more consistently recognize insurance policies as unique contracts that deserve special legal protection due to the inherent power imbalance between insurers and policyholders.
In other words, courts should recognize insurance contracts as more than just what’s written in them: They encompass expectations created by advertisements, sales pitches, and common understandings about insurance’s role in providing security. Feinman observes that some courts already disregard contract language if that language conflicts with reasonable consumer expectations from ads and sales materials. He advocates that this approach be more widely adopted.
For example, let’s say a patient submits a claim for emergency surgery, but the claim is denied based on a fine-print exclusion for “nonessential procedures” (despite clear medical documentation that the surgery was urgent and necessary). With the expanded legal rights Feinman proposes, the patient can sue for bad faith in addition to the claim amount. Their suit could be based on the claims reviewer ignoring medical evidence, misleading marketing materials promising “comprehensive coverage for emergency care,” and verbal assurances during enrollment that emergency procedures were “fully covered with no prior authorization required.”
Exercise: Understand How Insurance Companies Operate
Feinman argues that insurance companies tilt the playing field in their favor. Reflect on your experience.
- Have you or someone you know experienced “delay, deny, defend” tactics when filing an insurance claim? How did this experience affect your view of the insurance industry as a whole?
- Insurance companies use sophisticated data-gathering techniques while consumers often have a limited understanding of their policies. How might consumers overcome this information gap? What resources could help level the playing field?
- If you found yourself facing claim delays or denials, what specific advocacy tactics would you employ based on Feinman’s analysis? How might your approach differ depending on the type of insurance involved?
