It’s a horrible to put a dollar value on a traumatic event, but the insurance company will, so you had best be prepared
How the insurance company evaluates the value of your personal injury claim should be relatively straightforward and consistent, from case to case. But experience has shown me otherwise, and I’ve seen many situations where similar cases received completely different settlements.
I’m not just speaking as a personal injury lawyer: I’ve been on the other side and know how insurance companies think.
Before Derek Wilson Law, I was Derek Wilson, the defense lawyer for the big insurance companies.
Because of this background, I can speak to how these companies make decisions about compensation, and I’m happy to share some of the details with you so that you can understand why working with a lawyer is so important.
How Do Insurance Companies Make Money?
Essentially, insurance companies set a reserve, not just on a specific claim, but on their overall books.
They look at their overall premiums coming in and figure out, through detailed underwriting and risk assessment, what their potential payouts are going to be.
The difference between these two figures is one of the ways they may make a profit.
Obviously it’s more complicated than that, as most premiums are invested and there is income from there as well, but to keep it simple, that’s the math on how insurance companies make money.
This matters to claimants because once a reserve is set on a single claim, it’s can be tough to change it. Increasing the reserve eats into profits, and there isn’t a shareholder on earth who likes hearing that there are less profits.
Bottom line: the insurance company does not, under any circumstances, want to pay out MORE than what they’ve set in reserve in any given case.
If you aren’t represented during your initial communications with the insurance company, you risk communicating your situation in such a way that the insurance company will set a relatively low reserve, under the assumption that you’ll likely take whatever compensation you’re offered.
Frankly, compensation is awarded as conservatively, yet fairly, as possible. You have to remember that, yes, the company took your premium money in exchange for coverage, but nonetheless, they aren’t working for you or for your benefit.
How Does The Insurance Company Decide What Kind Of Reserve To Set On A Claim?
This is best illustrated through an example.
Let’s say that you’re a surgeon and your hands were injured in the accident. This is the kind of injury that can end a lucrative career instantly. The insurance company will likely set a high reserve because they odds of your successfully suing for compensation for lost earnings, etc… are high.
If, however, your foot was injured, they might set a relatively low reserve as even a permanent foot injury might not prevent you from doing your job, long term. They may not consider that a surgeon must be able to stand on their feet for hours at a time. It’s not like you can sit in an easy-chair in the middle of surgery should your foot ache…
Making sure that the company sets a good-sized reserve from the get-go is a priority. Regardless of the type of injury you have, it’s important to have a lawyer at your side, from the beginning, to explain the lack of easy chairs in modern operating rooms if must, or whatever the situation calls for to make your case for a higher reserve.
How Does Having A Personal Injury Lawyer On My Case Change My Compensation
If your insurance company knows that you have a lawyer—and they’ll know this right off because you’ll refer ALL their calls to your lawyer—they could set a higher reserve for your claim.
Because they know that your lawyer is already building your case with medical documentation and the like, to prove that you are seriously injured and cannot resume your life activities, let alone your job.
While the company may want to underestimate the value of your case, your lawyer will be working to demonstrate the value of it over the longer term: what it will take to return you to a position where you can work, relatively pain free, and move forward with your life.
And don’t worry about the insurance company going on the defensive just because you have a lawyer: it’s standard practice and they’re expecting it.
Remember: While there is no excuse for bad manners, nor are we trying to win friends. This is one of the reasons why all communication should go through your lawyer. Let us be the mean guy on your behalf.
The Reserve is (Tentatively) Set
Once the reserve is in place, your claim will be investigated and negotiations will begin.
I work to increase the settlement by making a strong case; they work to decrease the settlement by poking holes in the case.
Patience is the order of the day here, as these negotiations towards a settlement offer can carry on for some time: it can take upwards of two years to settle a complex accident claim.
The best way to protect yourself? Hire a personal injury lawyer as soon as possible after your accident.
Dotting the i’s and crossing the t’s over that period of time takes skill and experience to ensure that your case is being built accurately and to the fullest extent possible.