Property claims glossary
What are prompt-pay laws?
Prompt-pay laws are state statutes and regulations that set deadlines for acknowledging, investigating, deciding and paying claims, with interest or penalties when the deadlines are missed. They vary by state, and they turn cycle time from a service measure into a compliance obligation.
Worked example · fictitious claim
A family's $20,000 claim is paid one month after the deadline in a hypothetical state that charges 12% a year, or 1% a month, on late claim payments. The interest owed is $20,000 × 1% = $200, so the carrier pays $20,000 + $200 = $20,200.
How it affects a settlement
Prompt-pay laws do not change the amount owed under the policy; they change when it must be paid and add interest or penalties when it is late. Because the clock often runs from the notice of claim or the proof of loss, depending on the state, delays early in the file count against the carrier.
In practice
State statutes setting deadlines for acknowledging, deciding, and paying claims, with penalties and interest for missing them. They convert cycle time from a service metric into a compliance obligation with a clock attached.
Related
Cycle time · Bad faith · Reduce claims cycle time · property claims glossary