Why are Insurance Companies so Cheap?

I am often asked this question or some variation of it.  Many times by unrepresented people calling our office regarding the offer an insurance company has made to them, or by my own clients when we get the opening offer from the insurance company against which their claim has been made.  It is usually followed by the comment, “It seems like they'd just want to pay what is fair!”

I hate to spoil your interest in reading the rest of this blog, but I'm not sure that this question, so commonly asked, has any simple answer.  I'll give it a go here all the same.

Why Are Insurance Companies So Cheap?

I have never worked for an insurance company as an adjuster or defense attorney, so my speculation as to what motivates $500 offers on $5,000 claims, and $600,000 offers on $1,500,000 claims, for example, may not have a lot of clout, but here is my thinking:

1. Insurance companies don't care about injured people.  They care about profits.  If they can keep the number of premiums they collect up, while at the same time keeping the cost of the claims that they payout on the policies that they have sold down, they will show higher profits.
2. Insurance companies often are not given the best information.  They only see the property damage and medical records and bills in injury cases – failing to collect or see the testimony from those who live, work, and interact daily with the injured tort victim.  So the insurance companies make decisions about case value that is incomplete in comparison as to what ends up being presented at an arbitration or trial, where a more complete picture tells a more complete story, and makes it easier for a full valuation of the loss to occur.
3. Insurance companies often get away with paying less than the full potential value of a claim because many injured victims lose patience with trying to get treated fairly, and are unwilling to deal with the delays and costs of getting help from a good PI attorney and sticking with pursuit of their claim to a fair conclusion.

Lousy Offers Are The Norm

I could throw out other postulations as to why it is so, why lousy offers are the norm, rather than fair ones, but I'm not sure what point there is to doing so.  A claim is “worth” that amount which is most likely going to have to be paid out on it by the insurance company for the party at fault if it ends up being litigated to an arbitration award or trial verdict.  The fact is, insurance companies often offer significantly less than even they believe the claim is worth.  I can say that with a great deal of sad certainty, having railed against paltry offers from insurers for over 40 years now on behalf of a lot of really nice people who had been wrongfully harmed by the insureds of those companies.

The good news?  If an insurer has made a lowball offer to you on your insurance claim, you can do something about it.  And, you should.  Call an experienced personal injury attorney, and consult with them.  I bet at the end of your case, you will be glad that you did.