Insurance’s 50% No-Pay Rate Raises Questions About Coverage Value

About 50% of all private passenger auto (PPA) liability claims closed with no pay, or CNP, in 2025, according to an August 2026 analysis by The Wall Street Journal. Osei argues that liability coverage offers limited value when half of claims produce no payment, while deductibles remain high and premiums are expensive.

Osei also questions whether consumers should buy insurance except when laws and mortgage companies require it. The article cites $410 billion in insurance-company profits over the previous three years but does not identify the underlying dataset.

A HUB research paper dated August 17, 2026, identified about 33% of personal-lines customers with a claim as not fully indemnified. The source describes HUB as one of North America’s largest brokers. An American Property Casualty Insurance Association study put materially underinsured homes at approximately 67%.

Osei said a nonprofit commercial insured called after an earlier article on deductible expansion and thanked Osei for explaining the change. Neither the agent nor carrier had explained the move from a flat deductible to a percentage wind/hail deductible before a claim produced a $325,000 deductible. The nonprofit lacked the working capital to meet it.

What value does complete policy comprehension provide?

Osei frames the issue this way: “You only have coverage if you read the policy completely and understand all the language completely.” Osei says policyholders also bear the duty to request improvements from brokers or carriers when dissatisfied.

Osei teaches insurance classes and says even licensed professionals struggle with the definition of household members, much less how it changes between policies. The problem intensifies when insureds cannot identify their own exposures or the policy language.

Why did a claim close with no payment?

Osei acknowledges that customers who do not read their policies contribute to coverage disputes. But Osei says that explanation misses the point: policy terms can defeat legitimate claims, while the customer receives the policy only after buying it.

One claim in The Wall Street Journal analysis involved a father who ran into another car. It closed no pay because he had not listed his 14-year-old son, although the son had no license and was not driving. The policy required every household member above an unspecified threshold to be listed, creating the coverage defect.

Most states’ standards of care require insured parties to read and understand their policies, according to Osei. Osei argues that this duty exceeds the reasonable-person standard because buyers cannot calculate a building’s replacement cost using carriers’ estimators. Osei calls the standard impossible to meet.

How do replacement-cost models affect coverage?

Osei says carriers have reduced coverage substantially through policy language, including requirements to list people who cannot legally drive. In some claims, Osei says, carriers can choose which replacement-cost model to use, affecting adjustments relative to deductibles and coverage. Osei calls that choice an ethical and potentially legal issue.

According to Osei, replacement-cost estimators do not distinguish true replacement cost from replacement cost including ordinance-and-law coverage. Almost no industry participant, Osei says, can specify how much ordinance coverage a property needs beyond basic replacement cost.

Osei also says some carriers and agents favor placing more burden on insureds. They do so, Osei argues, because the burden reduces their accountability for a product that provides coverage less than half the time.

Can carriers rebuild value through accountability?

Osei first proposes creating an insurer that provides the expected coverage. Osei says that model already exists at the higher end of commercial insurance, where results have been favorable. It offers an alternative to exclusions, high deductibles and customer self-insurance.

Osei’s second recommendation puts brokers closer to the risk decision. Osei says new brokerages and advisory businesses are being created to advise insureds on exposures and required coverage. These experts read policies, identify gaps and recommend risk mitigation before a claim arrives.

Accountability is central to Osei’s case. Without laws and mortgage companies, Osei argues, most carriers and agents would already be irrelevant because legal and lending requirements underpin their sales. Historically, no one could walk away; now, Osei says, carriers and agents can form their own insurance companies, and alternatives are moving lower down the food chain.

Carriers may regard themselves as indispensable, comparable to the post office, according to Osei. Even if they cannot be replaced entirely, Osei argues, they can become less important and less valuable. Carriers need to accept responsibility to remain viable.

What role should agents and AI play?

Some agents’ errors-and-omissions insurers tell them not to provide professional advice because doing so adds exposure, Osei says. Osei calls that guidance suited to peddlers rather than professionals.

Osei adds that artificial intelligence could make such intermediaries unnecessary, with commission rates needing to fall to about 8%. A person who accepts accountability, Osei argues, can charge more.

Agents can improve their position by tracking claims and sharing documented results. Osei cites disparagement laws that restrict unverified criticism, making records essential. He argues those laws can protect questionable operators as well as legitimate ones.

His hypothetical Company A offers a 20% lower rate, but agent data suggest it may pay only 50% of claims. Documented payment results could make a consumer reconsider the discount.

Where does the next business opportunity lie?

Consumers have effectively become their own insurers because exclusions and high deductibles leave them bearing much of the risk, according to Osei. That gap creates demand for professional risk-management advice covering exposures, mitigation and carriers whose claims performance is known upfront.

Osei’s verdict is categorical: “A product that doesn’t work 50% of the time provides no value.” The forward test for carriers and brokers is whether they can document better claims outcomes and accept responsibility, rather than shifting more risk to policyholders.