How the Insurance Adjuster Determines a Settlement Offer

Before you decide to accept or reject an insurance company's injury settlement offer, it may help to know how the adjuster came up with the number.

Updated By , J.D.

If you're negotiating a personal injury claim with an insurance company, you'll probably be dealing with a "claims adjuster." It may be helpful to understand how the adjuster typically operates before you put together a written demand letter, and certainly before you accept (or reject and counter) a personal injury settlement offer.

Just like an attorney, an insurance adjuster will want to investigate and get a full understanding of the facts of the underlying accident and the claimant's injuries and other losses (called "damages" in legalese). So, what does this kind of investigation involve?

Getting the Insured's Story

If you're making a claim with the insurance company of the person you think is responsible for your accident, you're making a "third party" claim. The first thing the adjuster will want to find out is what the policyholder (that's the person you're saying is at fault for the accident) has to say about what happened. Besides talking to the insured person to hear his or her story firsthand, the adjuster will read any police report or accident report related to the incident.

Investigating the Claimant

Insurers have claims databases that allow adjusters to determine whether the claimant has ever filed a personal injury claim before. A good adjuster will also Google the plaintiff to dig up any available dirt on the plaintiff.

Requesting Documentation of the Claim

The adjuster will contact the claimant (or the claimant's personal injury lawyer) to introduce him/herself and request documentation relating to the claim. The adjuster will usually request documents such as medical bills, proof of earnings, tax returns, and proof of property damage.

A good adjuster will go through the documentation with a fine-toothed comb, reading every page of medical records and bills to see if anything is missing, if anything suggests that the claimant has had prior injuries or that the claimant is malingering, or if the claimant's lost earnings claim raises questions. An adjuster will not make a settlement offer and will not respond to a settlement demand without everything that's necessary to value the personal injury case.

Determining Settlement Value

In order to value the case, the adjuster has to think about two things: 1) what are the claimant's chances of winning at trial if a personal injury lawsuit is filed in court, and 2) how much might a jury award the plaintiff in damages?

Damages are usually divided into two categories: damages capable of exact calculation (medical bills and lost earnings), and damages not capable of exact calculation (including compensation for "pain and suffering"). For medical bills and lost earnings, the adjuster simply does the math.

However, adjusters often discount medical bills if they appear to be "soft," as when the vast majority of medical bills come from health care providers other than physicians and hospitals. If, for example, a plaintiff had $7,000 in medical bills, but $6,500 of that was for chiropractic and physical therapy, the adjuster might cut the medical bill claim in half for valuation purposes. Learn more about how the "right" medical treatment increases the value of an injury claim.

Determining the Value of a Pain and Suffering Claim

This is the real struggle, both for plaintiff's attorneys and for insurance adjusters. But adjusters these days usually use formulas and specialized software to assign a value to pain and suffering claims.

The First Settlement Offer

Once the insurer has arrived at a settlement figure, he or she must decide what to offer. The first offer is going to be a percentage of what the insurer thinks is the final value of the case. For example, the insurer may require that the first offer be 40% of the value of the case. There is no industry-wide standard on this. Different insurers have different procedures. Learn more about factors that determine personal injury settlement value.

One very important point is that adjusters often have leeway to adjust the first offer depending on who they are dealing with. If the adjuster is dealing with an unrepresented plaintiff, the first offer will usually be low. (Get the basics on accidents and injury claim settlements.)

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