Property claims glossary
What is claims leakage?
Claims leakage is the difference between what a carrier should have paid under the policy and what it actually paid, through overpayments, missed recoveries and avoidable expense. It is rarely one large error; it builds up from small misses across many claims, which is why it is hard to see from inside a single file.
Worked example · fictitious claim
A $30,000 wind claim applies a flat $1,000 deductible when the policy carries a 2% wind/hail deductible on a $300,000 dwelling limit, or $6,000. The claim is overpaid by $6,000 − $1,000 = $5,000. Repeated on 200 similar claims, that one miss comes to $5,000 × 200 = $1,000,000.
How it affects a settlement
Leakage is found after payment, so on any single claim it shows up as a check that was too large, a recovery never pursued or an expense that did not need to happen. Catching it before the check goes out is far easier than recovering it afterwards.
In practice
The gap between what a carrier should have paid under the policy and what it actually paid, through missed exclusions, unapplied limits, arithmetic that doesn't reconcile, and coverage granted by default under time pressure. Leakage is rarely one large error; it is thousands of small ones that were never visible.
Related
Subrogation · Supplement · Wind/hail deductible · Where claims leakage comes from, and how to reduce it · property claims glossary