PDF Summary:Delay Deny Defend, by Jay M. Feinman

In Delay, Deny, Defend, legal scholar and insurance expert 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.

This guide explores Feinman’s exposé of the insurance industry’s three-part strategy: deliberately delaying claims to put pressure on desperate policyholders, routinely denying valid claims through various stonewalling tactics, and aggressively fighting those claimants who persist. Beyond explaining how these practices work, we’ll explore their impact on individuals and society—and what can be done to restore the protection that insurance is meant to provide. Throughout this guide, we’ll also supplement Feinman’s ideas with insights from other commentators on the topic.

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Thinkers like Rothbard view deposits as property rights rather than loans. They maintain that when customers deposit money, they reasonably expect 100% of their funds to remain available on demand. When banks represent themselves as holding all deposits while secretly lending most of their funds, libertarians like Rothbard consider this to be fraudulent misrepresentation. They argue that fractional reserve banking effectively creates money out of nothing, distorting the economy and leading to business cycles of boom and bust.

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.

Dealing With a Power Imbalance in Negotiation

The wrangling between claimants and their insurers is a negotiation: a situation where each party wants something from the other. The insurer wants the claimant to cave and accept a low payment, while the claimant wants their full payout. When looking at these situations as negotiations, the willingness of insurers to use claimants’ financial desperation against them is just a form of leverage.

In Getting to Yes, Roger Fisher and WIlliam Ury define leverage as the ability to walk away from a negotiation or to seek a better offer elsewhere. The desperate claimant doesn’t have any leverage, especially when they’re being subjected to endless delays. They already have a contract with their current insurer, and they’ve already suffered a loss, so they’re not in a position to shop around for better offers from rival insurers after the fact. The insurance companies, meanwhile, are vastly wealthier and more powerful than their individual claimants: They can afford to stall, dither, and avoid engaging in any negotiation for years.

Fisher and Ury write that when you’re facing a significant power imbalance in a negotiation, it’s effective to know your BATNA, or best alternative to a negotiated agreement. Knowing your BATNA will protect you from accepting a bad agreement, as well as from rejecting a good agreement. A BATNA offers more flexibility than a rigid bottom line because it encourages you to evaluate the full picture of your alternatives.

For example, imagine your insurer offers you $50,000 for a claim you believe is worth $80,000. With a bottom line approach, you might have decided “I won’t accept anything under $75,000” and automatically reject the offer. But with a BATNA, you’d compare that $50,000 offer against your best alternative—perhaps hiring a lawyer, which might cost you $15,000, but could potentially win you the full $80,000. In this case, the litigation route could net you $65,000, making the insurer’s $50,000 offer inadequate. However, if litigation costs were higher or your chances of winning lower, the same $50,000 offer might actually look more attractive than your BATNA, even though it falls short of your original $75,000 bottom line.

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.

Push Back Against Insurance Company Obstruction

Some experts write that when insurance companies ignore your valid claims, you need to meticulously document every interaction with them, including dates, times, representatives spoken with, and discussion details. This creates a paper trail that, in the event of future litigation, can be used to demonstrate that you made repeated and consistent good-faith efforts to work through the proper channels and get your claim approved.

If an adjuster fails to respond within the promised timeframe, you can escalate by contacting their supervisors and managers. If that proves ineffective, you can file formal complaints with regulatory bodies like your State Department of Insurance, State Attorney General, and local legislators. National consumer advocacy groups like the National Association of Insurance Commissioners can also provide additional pressure through their complaint systems.

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.

(Shortform note: One common way that insurers manipulate contract language to minimize their financial obligations is through aggressive depreciation calculations. Depreciation represents the calculated loss in value of an item over time due to age, wear and tear, and obsolescence. Previously, companies typically limited depreciation to 50% of an item’s initial value, meaning a $1,000 couch would be valued at no less than $500. Today, however, some insurers depreciate items up to 90%, reducing that same $1,000 couch to just $100 in reimbursement value.)

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.

Tort Reform: Protecting Insurance Companies at the Public’s Expense

On top of aggressively contesting litigants in court, the insurance lobby has vigorously pushed tort reform legislation in state legislatures across the US. Tort reform is often presented as a way to reduce frivolous lawsuits and create a more efficient legal system by either limiting victims’ ability to bring tort litigation or by putting a monetary limit on how much juries can award to a plaintiff.

However, some experts note that tort reform’s true purpose appears to be protecting insurance companies’ profits rather than serving the public interest. They argue that insurance companies support tort reform because fewer lawsuits and lower payouts increase profits. However, insurance industry leaders have admitted that insurance costs won’t decrease even if laws make it harder for victims to seek compensation, undermining the entire rationale for these changes.

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.

From Mutual Aid to Modern Insurance: How Working-Class Communities Built America's First Safety Net

The modern, for-profit insurance system wasn’t the first form of social safety net—and some commentators argue that American communities were better off before the present insurance system came into being. Mutual aid societies flourished across the United States from the mid-1800s through the early 1900s, serving as the primary safety net for working-class Americans before for-profit insurers existed at scale. These grassroots organizations, formed by workers themselves, provided comprehensive support including health care, disability benefits, life insurance, and sick leave through small monthly contributions equivalent to about one day’s wages per year.

The scope of services these societies offered was remarkable—they operated hospitals with full-time physicians, established orphanages, and created cradle-to-grave support systems for their members. By 1920, roughly one-third of adult men belonged to such organizations, making them the most widespread form of voluntary association outside of churches. The societies were managed democratically, with members electing their own doctors and voting on how funds should be allocated.

While today’s insurance industry performs many of the same functions these mutual aid societies once provided, mutual aid societies emphasized democratic participation, community solidarity, and worker control. Modern insurance, meanwhile, operates through private profit and individual risk assessment. Some writers note that the historical success of worker-led organizations demonstrates that communities have long been capable of creating their own systems of economic security.

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.

Does More Information Lead to Better Consumer Choices?

Feinman’s idea about expanding access to information reflects traditional economic thinking, in which consumers who have more information about products make better purchasing decisions. However, research suggests that more information doesn’t always lead to better consumer choices.

When consumers encounter overwhelming amounts of product information, their ability to process information becomes strained. Rather than carefully analyzing all available details and options, people experience what researchers call cognitive overload. When this happens, shoppers abandon thorough evaluation and instead rely on mental shortcuts to simplify their decision-making. One common shortcut people use is “social learning”—following what others have done before them. When faced with too much information to process, consumers gravitate toward popular choices, assuming that if many people selected a particular product—or, in this case, an insurance company—it must be good.

The consequence of this behavior is that increased information can actually lead to poorer decision-making outcomes. Instead of using additional product details to find items that best match their specific needs, consumers cluster around popular choices. This convergence means that many people end up with products (or insurers) that may not serve them well, simply because they followed the crowd rather than making individual assessments. The digital marketplace, with its abundance of product information and prominent display of popularity metrics (like reviews and bestseller rankings) creates ideal conditions for this counterintuitive effect to occur.

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.

Do Small Fines Actually Encourage Bad Behavior?

It’s possible to take Feinman’s critique a step even further and argue that fines that are too small may actually induce irresponsible behavior. One behavioral economics study from the 1990s looked at the effects of small fines on parents who were late to pick their children up at daycare. The researchers implemented a system where parents would be fined a small amount (around $3) for each time they picked up their children more than 10 minutes after closing time. The expectation was that this financial penalty would discourage tardiness and reduce late pickups—the same way that fines on insurance companies are supposed to reduce unethical conduct.

However, the opposite happened. After introducing the fine, the number of late pickups actually doubled and remained consistently higher than before. The study revealed a crucial insight about how people respond to incentives. Because the fine was so small, parents began to see the penalty as the price for extra daycare time. Similarly, insurance companies may simply factor in the modest fines they sometimes have to pay as a known cost of doing business rather than a deterrent—potentially leading to increased violations if the penalties are seen as cheaper than compliance.

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.”

Courts Mandate Handling of Claims in Good Faith

A 2024 court ruling out of New York emphasizes that insurers must handle claims in good faith, giving equal weight to their own interests and those of their policyholders throughout the claims process. Companies employing “delay, deny, defend” tactics to minimize their financial exposure can become liable for damages exceeding policy limits.

Three key principles emerged from this decision:

• Insurers can’t withhold settlement authority to protect their financial interests at the policyholder’s expense. They must actively pursue settlement opportunities, even without explicit demands within policy limits.

• Insurance companies must promptly investigate and evaluate coverage claims. They can’t implement “wait and see” strategies hoping facts will develop to justify claim denial.

• Insurers must communicate investigation results to policyholders in a timely manner.