How Do Insurance Companies Evaluate Personal Injury Cases for Settlement?

Award-Winning Illinois Personal Injury Attorneys Offer Insights to Help You Avoid Mistakes and Maximize Your Financial Recovery

If you’ve been injured in an accident, negotiating with the at-fault party’s insurance company is one of the most critical steps in your case. Insurance companies often quantify or “score” personal injury claims using detailed formulas, algorithms, and subjective assessments. These methods are designed to minimize payouts and protect their profits, not to provide you with fair compensation.

Understanding how insurers evaluate claims and avoiding costly mistakes during settlement negotiations is essential to maximizing your compensation. Here’s a comprehensive guide to how insurance companies process claims, why they may undervalue yours, and how you can protect yourself.

“Insurance companies use complex tactics to undervalue claims, but with the right legal representation, you can secure fair compensation. At John J. Malm & Associates, our goal is to ensure every client’s recovery reflects the full extent of their injuries.” – Naperville personal injury attorney, John J. Malm

How Insurance Companies Evaluate Your Claim

Insurance companies use a multi-step process to determine how much they think your claim is worth.

1. Claims Adjuster Review

A claims adjuster reviews your case by analyzing:

• Accident Reports: Police or incident reports documenting the details of the accident.
• Medical Records: Bills, diagnoses, and treatment plans.
• Photographs and Evidence: Images of the accident scene, property damage, or injuries.
• Witness Statements: Input from witnesses supporting or contradicting your claim.

The adjuster looks for inconsistencies or gaps in treatment to reduce the claim’s value.

2. Setting Reserves

Once your claim is assigned, the insurance company sets reserves, an internal estimate of what they anticipate paying out. Reserves are influenced by:

• Injury severity.
• Medical bills and lost wages.
• The likelihood of settlement versus litigation.

Although reserves are not disclosed to claimants, they can significantly impact settlement negotiations. If reserves are set too low early in the process due to incomplete evidence or weak documentation, it may result in lower offers.

3. How Adjusters Are Evaluated and Incentivized to Pay Less

Adjusters are often evaluated, and even rewarded, based on their ability to settle claims for less than the reserved amount. For example, if reserves are set at $50,000 but the adjuster settles for $35,000, they are commended for saving the company money.

Some insurers offer bonuses or financial incentives for adjusters who consistently negotiate lower payouts. This creates a conflict of interest and highlights why having an experienced personal injury attorney is crucial to protecting your rights.

4. Use of Claims Evaluation Software

Insurance companies rely on software like Colossus to calculate settlement values. The software assigns monetary values based on:

• Injury Severity Codes: Each injury is assigned a specific code with a pre-determined value.
• Medical Treatment Costs: Evaluates treatments and adjusts costs to regional averages.
• Pain and Suffering: Uses a multiplier based on injury severity to estimate non-economic damages.

While these systems provide insurers with a baseline offer, they often undervalue claims by simplifying complex cases and ignoring unique circumstances.

5. Liability Assessment

Insurers will analyze the degree of fault for each party involved in the accident. In states like Illinois, which follows a modified comparative negligence rule, you can only recover damages if you are less than 50% at fault. Any degree of fault assigned to you reduces your compensation proportionally.

Factors That Impact Your Settlement Value

Insurance companies consider several factors when evaluating your claim:

• Severity of Injuries: Permanent injuries, disabilities, or long recovery periods increase claim value.
• Medical Documentation: Detailed and consistent records strengthen your case.
• Lost Income: Compensation includes wages lost due to injuries and reduced earning capacity.
• Pain and Suffering: Calculated based on injury severity and impact on daily life.
• Fault and Liability: Any fault attributed to you reduces your compensation.

Common Mistakes That Can Reduce Your Settlement

Avoid these costly mistakes to protect your claim:

1. Delaying Medical Treatment: Seek care immediately to avoid insurers arguing your injuries were minor.
2. Gaps in Treatment: Follow your doctor’s recommendations consistently.
3. Giving Recorded Statements: Anything you say to adjusters can be used against you. Consult an attorney first.
4. Accepting the First Offer: Initial offers are often far below the claim’s true value.
5. Posting on Social Media: Insurers monitor posts for evidence that contradicts your claim.

An Example of How Insurance Companies Undervalue Claims

Let’s look at how an insurance company might undervalue a soft tissue injury claim using software:

The Case

• A 32-year-old woman, Lisa, is rear-ended at a stoplight and suffers whiplash, lower back strain, and a mild concussion.
• Lisa incurs $8,000 in medical bills, including ER visits and physical therapy.

The Insurer’s Evaluation

1. Medical Costs: The software reduces Lisa’s physical therapy charges from $2,500 to $1,500, claiming they exceed regional averages. Her ER bill of $3,000 is reduced to $1,500, with tests flagged as “unnecessary.”
2. Injury Severity Codes: Whiplash and back strain are assigned lower severity values, capping her injury value at $6,500.
3. Pain and Suffering: Calculated as 1.5 times the reduced medical costs of $4,000, resulting in $6,000.
4. Settlement Offer: The adjuster, relying on claim evaluation software like Colossus recommends an initial offer of $8,000, a significant undervaluation of Lisa’s claim.

The Attorney’s Role

An experienced attorney challenges these reductions by presenting medical evidence, justifying treatment costs, and negotiating a fair settlement. With legal representation, Lisa’s settlement increases to $25,000 to $28,000, a settlement range more closely reflecting the value of her injuries.

Understanding the Insurance Company’s Adverse Position

It may seem unfair, but the law allows insurance companies to take an adverse position in evaluating your claim. They are not obligated to accept your medical bills or damages at face value and often use claims evaluation software and adjuster discretion to justify reducing payouts.

Because insurance companies prioritize their bottom line, it is essential to have a knowledgeable personal injury attorney who can challenge these tactics. An attorney will level the playing field, ensuring your claim reflects the full extent of your injuries and damages.

How an Experienced Illinois Personal Injury Attorney Can Maximize Your Settlement

An experienced personal injury attorney plays a crucial role in maximizing your settlement by combining legal experience, negotiation skills, and strategic case management. From the outset, they conduct a thorough investigation into the circumstances of your injury, gathering medical records, witness statements, and expert testimony to build a compelling case that clearly demonstrates liability and damages. Attorneys understand how insurance companies operate and anticipate the tactics adjusters use to minimize payouts. With this knowledge, they can counter lowball offers and push for fair compensation. They also calculate the full scope of damages, including medical expenses, lost wages, future rehabilitation costs, and non-economic damages such as pain and suffering, ensuring that no aspect of your loss is overlooked.

By leveraging their courtroom experience, they signal to insurers that they are prepared to litigate if necessary, which often motivates higher settlement offers to avoid trial. Additionally, seasoned attorneys know how to present evidence persuasively, whether in negotiations or in front of a jury, and they use expert witnesses to strengthen claims related to medical prognosis or accident reconstruction. Their familiarity with local laws, procedural rules, and precedent allows them to navigate complex legal hurdles efficiently, preventing costly mistakes that could weaken your case. Ultimately, an experienced Illinois personal injury attorney levels the playing field against powerful insurance companies, advocating tirelessly to secure the maximum compensation you deserve. Their guidance not only increases the likelihood of a favorable settlement but also provides peace of mind during a stressful and uncertain time.

Contact the Top-Rated Illinois Personal Injury Lawyers at John J. Malm & Associates

Insurance companies use sophisticated tactics to undervalue personal injury claims, from setting low reserves to incentivizing adjusters to reduce payouts. By understanding how insurers quantify claims and avoiding common mistakes, you can better protect your rights.

At John J. Malm & Associates, we have over 90 years of collective experience helping personal injury victims secure fair settlements. We understand the strategies insurers use and are committed to fighting for the compensation you deserve.

Contact us today for a free consultation to discuss your case and learn how we can help.