• Kenneth Powell

How Do Insurance Companies Determine Settlement Amounts?

If a person is harmed in a car accident, there's a strong chance they can seek compensation through an insurance policy. The majority of vehicle accident lawsuits end in an insurance settlement. It's critical to get a reasonable settlement for their vehicle accident case. To evaluate whether their vehicle accident payout is reasonable, they must first understand how insurance companies calculate settlement amounts. Powell Law Firm’s personal injury team can explain insurance company settlements. To learn more about Powell Law Firm, click here.


The amount of a settlement is determined by three factors: responsibility, damages, and the conditions of the insurance policy. Liability must be established before an insurance company may offer a payout. If the insured party is found to be responsible for the claim, the next step is to determine the victim's losses. Lastly, the insurance company examines the policy in question to establish the sorts of losses covered and the policy limitations. When determining settlement amounts, insurance companies consider all these criteria.


Getting the Insured's Side of the Story

Getting the Insured's Side of the Story


A "third-party" claim is one in which the victim files a claim with the insurance company of the individual they believe is liable for their accident. The adjuster may first want to know what the policyholder (the person the victim is claiming for the accident) has to say about what occurred. Additionally, the adjuster can study any police report or accident report relating to the occurrence in addition to speaking with the insured person to hear his or her story firsthand.


Investigating the Claimant


Insurers have claims databases that allow assessors to see if the claimant has previously filed a personal injury claim. A qualified assessor can also Google the plaintiff to unearth any dirt on him or her.


Requesting the Claim's Documentation


The claimant (or the claimant's personal injury lawyer) is contacted by the adjuster, who introduces himself and can seek documentation related to the claim. Medical bills, tax returns, proof of earnings, and proof of property damage are common papers requested by the adjuster.


A professional adjuster can go over the material, scrutinizing every page of medical documents and bills to see if anything is absent, if anything implies the claimant has had previous injuries or is seeking attention, or if the claimant's loss of income claim raises any red flags.


The adjuster may not issue a settlement offer or reply to a settlement demand unless he or she has all the information needed to value the personal injury case.


Determining Settlement Value


To assess the case, the adjuster must consider two factors: 1) the claimant's chances of prevailing at trial if a personal injury lawsuit is filed in court, and 2) the number of damages that a jury can award the plaintiff.


Losses are usually classified into two categories: damages that can be calculated precisely (medical costs and lost wages), known as patrimonial loss, and damages that cannot be calculated precisely, non-patrimonial loss (including compensation for "pain and suffering" or emotional distress). The adjuster just does the math for medical bills and loss of income that can be claimed.


On the other hand, adjustors frequently discount medical expenses that appear to be "soft," such as when the great majority of medical bills come from sources other than hospitals and physicians. If a plaintiff's medical bills totaled $8,000, but $7,500 of that was for a chiropractor and physiotherapy, the adjuster may reduce the medical bill claim in half for valuation purposes.


Putting a Cost on a Pain and Suffering Claim


This is the true battleground for both plaintiff's lawyers and insurance adjusters. However, nowadays, adjusters frequently assign a value to pain and suffering claims using formulae and sophisticated software.


The First Offer of Settlement


After arriving at a settlement sum, the insurer must decide what to provide. The initial offer is usually a percentage of the case's maximum cost, as determined by the insurer. As an example, the insurer may stipulate that the initial offer is for 30% of the case's value. This is an area where there is no industry-wide standard. Procedures vary depending on the insurer.


Adjusters typically have discretion to change the first offer depending on who they're dealing with, which is a crucial aspect to remember. The first offer is almost always modest if the assessor is dealing with an unrepresented plaintiff.