How Insurance Companies Evaluate Claims (Part II)
So now that the insurance company has your settlement demand package, what happens next? With the volume of claims an insurance company receives, it’s almost impossible to imagine an insurance adjuster reading through every single medical record. Not to mention, analyzing every claim from scratch. To assist their employees, many insurance companies use software to help evaluate claims.
The Tools of the Insurance Companies
This may not sound like a bad thing at first. But the way some companies use the software actually limits or reduces the value of claims. It’s also hard to put a value on pain and suffering damages, and there’s no calculator for human suffering. The most notable programs are Colossus, Liability Navigator and Claim IQ. However, some insurance companies don’t admit to using software. Others say the software is just “one tool” they use to determine the claim value. Either way, there’s been plenty of controversy. For example, some insurance companies only offer the lowest amount of a settlement range, even if the software recommended a higher amount.
In Colossus, there are 720 diagnoses and 12,000 factors that play into determining the value of a claim. Adjusters input the information from the demand package and medical records into the software. This is why it’s a good idea to organize the settlement demand in a way that will lend itself to triggering the best response from the software. [One of the reasons we list all ICD codes in our demand letters]. The language the physician uses is also very important. The records need to be specific and clearly indicate what conditions or diseases have been diagnosed. And, very importantly, that they were caused by the accident.
Once the adjuster concludes their review (with or without the assistance of a computer program), they will make an offer on the case. This is where having a strong negotiator for your attorney comes into play.
Many cases get settled after the demand is received. Although, it often becomes necessary to file a lawsuit to get the full amount of the damages to which you are entitled. At some law firms, a legal assistant or case manager negotiates with the insurance claims adjuster. At C. Todd Smith Law, it is our practice to always have the attorney negotiate the claim in order to obtain the highest result possible. If you are deciding between different law firms to handle your personal injury claim, ask who will be negotiating the claim on your behalf. Will it be a lawyer or non-lawyer?
The Role of the Attorney
Typically, we give the claim adjuster 30 days to review the demand and make an offer. Sometimes the adjuster will request more time or request additional records. It is up to the attorney to determine when to grant an extension or discuss with the client filing a lawsuit if there are delays.
If the request for more time is reasonable, it is usually a good idea to work with the adjuster to get them the information they need to fairly resolve the claim. However, if the delay is unreasonable it may be in the client’s best interest to file a lawsuit immediately.
Once the adjuster does make an offer, they may be limited in their settlement authority depending on the predetermined settlement range. This range may be based on the recommendation of the software referenced above. The attorney will discuss with the client if it is appropriate to make a counteroffer. And based on the negotiation strategy, how much to offer. It is not unusual that the first couple of offers are very far apart. Some insurance companies routinely make “lowball” offers. Sometimes there are strategic reasons for your offer to start at a much higher amount than you would accept. This should be a conversation with your attorney about what specific negotiation strategy is best for your case.
The negotiations may take place over a couple of weeks or months, depending on the circumstances. At some point, the claims adjuster will indicate that they have made their best offer and it will be up to the client, with the advice of their attorney, to accept the best offer or file a lawsuit in an effort to get a better result. This could happen in a settlement after filing the lawsuit, or by going all the way to a jury trial and asking a jury to award your damages.
This stage of the claim is very important. This stage requires a detailed consultation with your attorney to determine what is the best course of action. Remember that filing a lawsuit will usually lead to higher attorney fees and court costs. Because of this, you will have to get a much better result after filing suit to obtain the same amount being offered prior to filing suit. For example, see the hypothetical comparisons in the chart below where the settlement offer is increased by $5000 after filing suit:
Keep in mind these costs would be significantly higher if the case goes all the way to a trial. Court reporter fees, expert witness fees, and fees charged by doctors and medical professionals for their deposition testimony, can add up to tens of thousands of dollars. However, these additional expenses may be necessary if the insurance company refuses to pay you a fair settlement, or the adjuster is undervaluing your claim.
If you need help or have questions about your settlement negotiations, please contact our team at C. Todd Smith Law for your free case evaluation.