Bad-faith remedies designed to protect policyholders from unfair claim settlement practices can potentially harm consumers, warns a new report published by the National Association of Mutual Insurance Companies (NAMIC).

The report, “First-Party Insurance Bad-Faith Liability: Law, Theory, and Economic Consequences,” was co-authored by Dr. Sharon Tennyson of Cornell University and Dr. William Warfel of Indiana State University. It suggests that bad-faith liability laws designed to deter insurers from engaging in unfair claim handling practices often have the effect of increasing claim costs and, ultimately, increasing premiums for consumers.

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