Yes, but the incentives created by that system lead to insurance adjudicators operating with extreme adversariality towards the insured. Add to that the extreme inelasticity of demand for insured products (e.g. healthcare, or getting access to a car to use to commute after one is totaled), regulatory capture of insured products/services by insurers, and time, and you get pretty toxic systems wherein insurers exert upwards price pressure without significant checks.