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How Do Insurance Companies Negotiate Settlements?

Experts In This Article

insurance company settlement

After a serious accident, you will likely have to deal with an insurance company as you seek the compensation you deserve for those injuries. You may have heard about negotiating with an insurance company, but wonder how that process actually works in practice, especially if you feel that the insurance company has issued an unnecessarily low offer.

How does the insurance company negotiate, and how does that apply to you as you attempt to manage your claim?

The Initial Offer

Most of the time, the insurance company will try to get in touch with you soon after your accident to issue a settlement offer. Ideally, the insurance company wants you to accept that offer fast, rather than taking the time to think it over and determine how much compensation you might really deserve for your injuries or how it might impact you long-term.


First, the insurance company will investigate the accident and the injuries you have claimed. The investigation will involve a look at all evidence related to the claim, which may help give the insurance company an overall better idea of how much compensation to offer.

The investigation will focus on two key things:

  • Who caused the accident (including how much liability the party insured by that company bears for the accident); and
  • The financial value of the damages you sustained as a result of the accident.

The insurance company will look at a variety of factors to help determine those two key elements. First, they may look at the police report, video footage, photos, or witness statements from the accident: clear statements that can help them get a better idea of who may have caused the accident and whether any other factors may have contributed to your injuries. Then, they will typically evaluate other factors, including bringing in expert witnesses who can help recreate the accident and offer more information about what might have caused or contributed to it.

Next, the insurance company will take a look at your injuries, usually with a look at your medical records. Sometimes, the insurance company may base an initial settlement offer on an estimate of the immediate medical costs you will face due to a specific injury.


Once the insurance adjuster (generally a single adjuster assigned to manage your claim rather than a group) has taken a look at all the evidence related to your accident, they will determine how much compensation to offer you. Sometimes, the adjuster may make those calculations based on the insurance company’s policies. In other cases, the adjuster may run the information provided through a computer program that will establish the initial settlement offer given to victims who have suffered similar injuries.

That calculation usually includes:

  • How much liability, by percentage, the party the company insures bears for the accident
  • The direct financial damages you suffered as a result of the accident, usually based on estimates
  • The percentage the company allows as part of an initial settlement offer
  • The limitations of the policy

In Florida, if you need to recover compensation for a car accident, the calculation will also include the value of any personal injury protection insurance you might carry. Florida drivers must carry personal injury protection insurance alongside their liability insurance on their vehicles. If you carry PIP insurance, it will help provide compensation for some of your immediate medical expenses: generally up to $10,000, minus the amount of your deductible. The insurance adjuster will subtract that amount from the value of your settlement before performing calculations.

An initial settlement offer may reflect only a fraction of the compensation you really deserve for your injuries, especially if you suffered severe injuries like a spinal cord injury or traumatic brain injury. Severe injuries often require an insurance company to offer more compensation than relatively minor injuries, and the insurance company may fight the issue harder.

Once you receive a settlement offer, you have the right to respond according to your specific needs. Most accident victims should not accept the insurance company’s first offer, especially since it may not reflect the full compensation they deserve for those injuries. Instead, consult with an attorney to get a better idea of how much compensation you should expect for those injuries.

Your Demand Package

Ideally, you should work with an attorney to put together a demand package that will include the real financial value of the damages you sustained in your car accident. Your attorney may recommend waiting several months to determine how you will recover from your injuries and what long-term limitations you may face because of your accident. Did you suffer permanent disability because of your accident? Do you have significant medical costs, including costs that may last for the rest of your life, because of your injuries? Your attorney may want to include those factors when calculating the value of your personal injury claim.

Your attorney will work with you to calculate the real value of your injuries, which you can then ask for in compensation from the insurance company. Sometimes, you may choose to submit this package as a response to the insurance company’s initial settlement offer.

Your Actual Medical Costs (Or Anticipated Future Medical Costs)

Even the cost of relatively minor treatment can add up fast after an accident. Ambulance transport and treatment in an emergency room alone can cost hundreds or even thousands of dollars, depending on the extent of your injuries. If you have severe injuries, you may find yourself facing long-term medical costs and struggling to determine what might come next.

Your attorney will help you calculate your real medical costs.

Keep track of medical expenses related to your injuries throughout your recovery, including:

  • Emergency transport
  • Emergency medical care, either at a hospital or urgent care center
  • Any procedures, including surgery, used to treat your injuries
  • Durable medical equipment, from crutches and braces to wheelchairs, hospital beds, or items used at home to help you maintain independence and mobility
  • A stay in a long-term care facility
  • In-home medical care or assistance with daily tasks
  • Physical or occupational therapy to aid in your recovery
  • Psychological therapy, if you have long-lasting psychological effects from your injuries

If you have to make modifications to your home or vehicle—for example, installing wheelchair ramps or widening doorways—to make them more accessible, you may want to talk to your attorney about those costs and how they may factor into your insurance claim.

In some cases, you may need to respond to a settlement offer or create your demand package before you have finished with your recovery. You may need to work with your doctor and your lawyers to calculate the anticipated future cost of medical treatment and bills.

Your Lost Wages

Serious injuries can mean time off work while you recover—and for many people, that loss can be just as financially devastating as the actual cost of medical treatment. Missing time at work may leave you struggling to pay your regular bills. Many employers, especially if you work on an hourly basis, may not provide adequate support and assistance while you recover. Others may work with you to get you back in the office, but you may still need to miss many hours at work as you go through treatment for your injuries, have therapy, or simply cannot work full-time due to the limitations and pain created by your injuries.

Your attorney can help you put together a look at the income you have lost as a result of your injuries and include them as part of your personal injury claim.

Pain and Suffering

Many personal injury claims include some element of compensation for pain and suffering. Some lawyers and insurance companies will use a specific formula, often based on a percentage of your medical costs, to calculate how much compensation you may deserve for pain and suffering. In other cases, you may need to directly explain how your injuries have impacted you and what losses you have experienced.

Did your injuries cause you to miss out on specific activities and plans? Did they prevent you from engaging in your favorite hobbies? Do they make you feel less independent? Some people may even find that they lose their overall enjoyment of life as a result of severe injuries sustained in an accident. An attorney can help you calculate the specific financial value of your pain and suffering and include it as part of a personal injury claim.

Once you have put together your demand package, your attorney can submit that package to the insurance company. Ideally, the insurance company would examine the evidence, take a look at your losses, and issue the compensation you asked for. In most cases, however, the insurance company will come back with another offer. At that point, negotiations begin.


The negotiation phase with the insurance company can take time. Often, insurance adjusters have a specific set of criteria that they have to meet. The insurance company’s goal includes maximizing profits, which may mean minimizing the compensation they pay out to each accident victim.

Once the insurance company has received your demand package, the adjuster will attempt to negotiate. Most of the time, the adjuster will send back an offer based on your demand package: often an offer that attempts to meet in the middle between their initial offer and your demands.

Sometimes, the insurance company’s policies may indicate that the adjuster can only raise the offer by a set amount or a set percentage each time. Other times, the adjuster may carefully evaluate your demand package to get a better look at how your accident has impacted you and the costs you have claimed.

The insurance adjuster may look at several key factors to determine the next offer.

  • What medical bills did you claim? Bills from chiropractors and alternative treatment providers, for example, may hold considerably less weight than bills from specialists. In some cases, the insurance adjuster may attempt to show that you did not need certain treatments, based on the type of injury you suffered and the reliability of that type of treatment. The company may deny those specific elements of your claim.
  • Did you have any prior injuries that may have contributed to your limitations? The insurance company will not pay out for treatment for a past injury, though you can usually negotiate to receive payment when an accident exacerbates those injuries.
  • Have you ever filed a personal injury claim in the past? The insurance adjuster may take a look at your history to help determine whether you have issued a fair offer.
  • Does anything in your claim raise questions? For example, have you claimed substantially more compensation for lost wages than you seem to deserve?
  • How did you calculate your pain and suffering? Does it seem to represent a fair percentage, based on the injuries you sustained?

The insurance adjuster may show specific changes made to your breakdown, or may simply issue a lower offer based on several factors uncovered during this negotiation stage. In some cases, the insurance adjuster may also request an independent medical evaluation to get a better idea of your injuries and how they limit you.

At each stage of the negotiation process, your attorney will heavily emphasize the costs you have faced due to your injuries, while the insurance company may attempt to minimize your losses. In most cases, you and your attorney will already have an idea of the lowest settlement offer you will take: the bottom line amount that you will not settle without, usually based on your actual financial losses from the accident. However, you can—and usually should—continue to negotiate until you receive a fair offer for your injuries.

Having a personal injury attorney on your side can make a huge difference as you negotiate an insurance settlement following a severe accident. Contact a personal injury lawyer near you as soon as possible to negotiate with the insurance company.

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