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The 15% Penalty That’s Changing Auto Insurance Disputes in Connecticut » Live Insurance News

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Connecticut’s Auto Insurance Shake-Up: Faster Payments, Higher Stakes

Connecticut just flipped the script on auto insurance disputes. Claimants? They’ve got reason to celebrate. Insurers? Not so much. A new law, known as House Bill 6435—or Act 25-131—shifts the playing field, and changes are already in motion. The goal? Faster payments for claimants and a system that doesn’t drag disputes through endless, costly delays. But what exactly does this mean, and why should anyone care?

Claimants Get Paid. Fast.

Ever felt stuck in limbo waiting for an insurance payout? This overhaul is putting an end to that. If there’s no argument about at least part of your claim, the insurer now has to fork over the undisputed amount. Immediately. No holding your money hostage while they haggle over the rest. Need to get your car back on the road while hashing out the final details? Done.

Disputes over amounts still go to arbitration, but here’s the kicker—arbitrators now have just 15 days to make a decision. No more waiting around for months. That decision timeline is a relief for anyone sick of the slow grind of claim resolutions. It’s a win for everyday drivers who depend on their cars to live their lives.

Painful Price Tag for Insurers

But insurers aren’t exactly popping champagne bottles. Why? This law hits their bank accounts hard. Arbitration hearings used to cost claimants and insurers peanuts—just $20 to start. Now? They’re a whole different story. The new average cost per hearing? $3,075. And here’s the twist. Insurance companies are footing that bill, not claimants.

Break it down. Roughly $925 for paperwork. $1,350 for the arbitrator’s time. Another $800 for follow-up work. It adds up fast. For about 20 hearings a year, insurers could be looking at nearly $50,000 in arbitration costs alone. And guess what? That’s just the start. Lose the case, and insurers could end up paying an extra 15% annual interest on the disputed amount. That interest clock starts ticking the moment they pay the undisputed portion. It’s a stiff penalty—a game-changer, really. Are the days of dragging disputes out to save cash over? They just might be.

A Penalty That Packs a Punch

Fifteen percent interest. Doesn’t sound like much at first, does it? But for insurance companies, it’s a serious sting. Say a claim’s disputed amount is $10,000. Every year that drags on, the insurer owes an extra $1,500. For an industry built around managing risk and controlling costs, this penalty is a wake-up call. It’s designed to do one thing—push insurers to resolve claims faster and avoid stalling tactics. Delays could get really expensive, really fast.

What’s the ripple effect? Insurers may think twice before challenging claims they’re not confident about. That means claimants could see more fair and timely outcomes instead of prolonged fights. Sure, insurers might tighten their processes, but for consumers, that’s probably a good thing. Stalling won’t come cheap anymore.

How Connecticut Stacks Up

This isn’t the first state to shake up insurance arbitration rules, but Connecticut is definitely making waves. Across the country, arbitration systems differ wildly. Some states don’t involve arbitration at all, forcing disputes into full-blown lawsuits. Others leave consumers to shoulder significant costs to pursue claims.

Connecticut’s new approach? A middle ground. Consumers pay nothing for arbitration, but insurers face steep costs and penalties for losing. It’s a clear signal that the state is serious about holding the industry accountable. Other states might be watching to see how this plays out. Will faster payouts and financial deterrents for slow insurers lead to better outcomes? If it works, this system could inspire similar reforms elsewhere.

The Bottom Line

For claimants, this law feels like justice. Faster payouts. Fewer delays. For insurers? It’s a costly adjustment. Higher arbitration expenses and steep penalties could dent their bottom line, but it’s all part of forcing accountability. And as states look for ways to modernize their own systems, Connecticut could be setting a precedent.

Change always rattles someone. But if this overhaul brings balance to the system, it might just be worth the disruption. After all, who doesn’t want their money faster?



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