Interviewer: Do you employ this strategy when you're dealing with a car insurance company? Have you found that giving the insurance adjuster complete documentation helps your client get a better and quicker recovery?
Guy S. DiMartino: Yes, insurance adjusters are people. If you know what information they need to adjuster the claim, and you provide them all the information, it makes their job easier. If you make their job easier, the potential to get more money is better. There is one caveat to this. You have to have a good case. If you have a bad case, all the documentation in the world is not going to get the client more money. Remember, insurance companies are in the risk business. The only way to motivate an insurance company to pay good money is to provide them with sufficient information so they perceive a greater risk then they bargained for when they sold the insurance policy.
Interviewer: What does loss reserves mean? What is the perspective of the insurance adjuster?
Guy DiMartino: An insurance company sells a car insurance policy to a driver and receives a premium. The rate that is set for the premium is based on a number of factors including how good of a risk the driver may be. An 18-year-old boy will pay a higher rate than a 40-year-old married guy. The insurance policy has certain benefit limits. So, for instance, if you buy an automobile insurance with $50,000 of bodily injury insurance. You have a total of $50,000 to pay another driver if they are injured because of your negligence. The insurance company makes money if the premium payments it receives plus investments exceeds the amount it pays out in claims. Now, if there is a claim because of an accident, the insurance company's job is to settle the case within the policy limits, to protect their insured. Insurance companies do not want their insured to have the risk of a verdict that is more than the insurance policy limits. So, when an insurance adjuster gets a file, they open up the file and analyze the facts of the case to determine whether their insured or their driver was at fault for the accident. Then, they take a look at the injuries to see the value of the case. If the adjuster believes the claim is worth $25,000, she will set a loss reserve on the claim of $25,000. This is the amount of money the insurance company anticipates it will have to pay on the claim.
They have to set these limits or loss reserves within the policy limits because that's how insurance companies work. In many insurance claims, the company carries these numbers on their books for years because the claim may take years to resolve. So, if the insurance company opens a claim today in 2015 with a loss reserve of $25,000, that number is carried carried on the books until the case is closed out which might be in 2017. Now, do you see why insurance adjusters are under pressure to close cases as quickly as possible?
The key to loss reserves from the injured person's side is that we want the adjuster to set them higher than the value of the claim because it will make it easier to get the case settled. Once loss reserves are set, an insurance adjuster has to go through a process to get loss reserves increased. The process usually requires one or more supervisors to review the file and request the increase from their bosses. Insurance adjusters are people, like you and I, and they do not want their bosses looking at their work critically.
Many insurance companies take cases before a claims committee to get loss reserves increased. Depending on the company, the process can take a long period of time, which can hurt an injured person who is strapped for cash because of medical bills or the inability to work. When an insurance adjuster has to get more settlement authority, somebody is second-guessing the adjuster. Nobody likes to be second-guessed. On the other hand, if the loss reserve is set higher than the eventual settlement amount, the adjuster looks good. This is why it is important to understand the inner workings of insurance companies; it allows you know the buttons to push with the insurance adjuster and get the case resolved amicably.
Interviewer: Any other tactics that you have when dealing with insurance companies that helps your clients?
Guy DiMartino: There are some insurance companies based on the facts of the case, where it's not even worth getting into settlement discussions. In these cases we file a lawsuit immediately because it is better to just deal with the insurance company's lawyer.